Houses. They're so important, and they evoke so much emotion. Sometimes, it is hard to see the hard facts through the rainbows and love. That's not always a bad thing, but it is definitely a bad thing when it comes to selling a house. And here's the thing: the first time to be thinking about selling a house is when you are buying a house. Part of the math of whether to buy or rent must always include the cost of selling.
In your post From The Mailbag: Why Buying Doesn't Make Sense, you say that the average cost of selling a house is 10% of the sales price. That seems awfully high to me. Can you explain?
I love it when I get emails asking me to talk more about something I've written about before, because that means that someone is reading. And I can talk quite realistically about this exact question, because we have just sold a house.
Great question! 10% is an average that most professionals use to for planning, your results may be higher or lower. Here are some things that expenses that you may incur:
Preparing the house for sale Staging Utilities Lawncare Cleaning Inspection repairs Realtor commissions Closing cost assistance to buyers Transfer and recordation fees
I feel like I'm forgetting something. I hope you all will tell me!
It just so happens that we sold a house this week, so I can share our numbers with you.
Sales price of property $454,000
Preparing the house for sale - $15,000 Staging - my realtor covered this cost Utilities while the house was vacant - $600 expected (haven't received final bills yet.) Lawncare to prepare for sale and while the house was vacant - $600 Cleaning - $385 Inspection repairs - $3900 Realtor commissions $24,970 Closing cost assistance to buyers - none - we got lucky! Transfer and recordation fees - $4995
All told, it cost us $50,450 to sell our house. That's 11.11% of the sales price.
Obviously, not everyone is going to have the same expenses. If we were living there, we wouldn't count utilities as a sales cost because we'd be paying them anyway. We didn't have to spend over $15,000 on paint, new light fixtures, and lawncare before we put it on the market, but I don't think we would have had five competing offers if we hadn't. Selling without real estate representation will obviously save you a bundle, but again, I don't think we would have had five competing offers without the expertise of our agent. (It was quietly on the for sale by owner market for two months before we listed it with our agent, and we got only a few nibbles.)
We were fortunate that we owned this house for 14 years, and it had appreciated enough to cover these expenses. But that's still a painful hit that I honestly did not anticipate.
Please note: the 10% amount does not include any capital gains taxes or depreciation recapture taxes. In our case, we are excluded from capital gains but we will have a hefty depreciation capture bill.
I hope that helps you think through the expenses of selling a house.
For those of you who have sold, how were your expenses? Did they come in somewhere around 10%? Were you prepared for it, or was it a surprise?