Whether it’s from market research or family discussions, most individuals have one thing on their mind when considering selling their house, the million-dollar number, not so much thinking about what it costs to get there in the end.
Although selling conventionally with a broker seems like a straightforward process, behind the scenes, many costs emerge that begin to eat away at the final number. Some are expected but others come as a surprise to sellers who thought they had this whole financial ordeal figured out.
The Commission Realization
The first expected cost comes in the form of the agent’s commission. Typically, between 5-6% of the sale price, the listing and buyer’s agent each receive a cut which means for a $300,000 home, sellers are dishing out $15,000 to $18,000 before anything else. It’s a realistic cost that’s not welcomed but accepted as part of the process. Yet that’s not even half of what sellers can expect their selling endeavor to cost them.
Carrying Costs in the Interim
What hurts most sellers’ wallets, however, is that the average time on the market is not one day. Depending on the area and season, average time on the market hovers for at least one month and even a few months more.
During this time, however, sellers are still held responsible for their previous properties as mortgages need to be paid while property taxes aren’t reduced, neither are costs for insurance and utilities, whether anyone is living in the home or not.
For those who may have already moved due to work transfers or family relocations, this means double housing costs with renting in their new destination or paying for a second mortgage in addition to this one. Basically, for every three or four months the house sits on the market, another few thousand dollars are lost.
Bringing the House up to Code
Next expected cost comes from renovations, if applicable. Agents usually walk through a property and let sellers know what needs to be taken care of from paint color to carpet wear to yard work, kitchen updates and more. What seemed fine last week to an owner may need changes this week for a potential buyer. Sellers might invest $10,000 to $20,000 into making minor updates to ensure they increase their costs sufficiently high enough when they receive their offers to ensure it was worth it in the end.
For some it is; others it isn’t. Either way, it’s money out of pocket before seeing any returns. Paints, contractors, landscaping, professional cleanings and minor repairs add up quickly. For those who need to downsize or are working with an overloaded home in the first place, options like We buy houses in Houston exist to help alleviate homes with liens and debts without worry for renovations so they can focus on financial situations rather than home improvements without guarantees.
Staging Services
Not all agents require staging but in contemporary times and competitive markets, staging has become a general norm for what buyers expect. Rental furniture and decorations might run anywhere from $2,000-$5,000 or more depending on how extensive the need is; if it’s a larger home that sits for months or smaller home requiring substantial staging, it could be even more exorbitant.
Some sellers use their own furniture but even then, it’s just as involved, in addition to rearranging furniture in unconventional and decluttered manners, some sellers may even have to remove items they wanted to keep out, expenses for everyone involved.
One offer received doesn’t guarantee selling either, even if buyers also come with an inspector, who can find issues with even the most well taken care homes. Roofs, wires and pipes not up to code (what was code two decades ago), cracks in the foundation that have settled buyers will always ask for repairs based on the inspection report as well as reconsidered price points due to findings.
For sellers who want to keep the deal going, they’ll need to assess whether they want to make repairs (costs) or reduce their price (more losses). Either way, their initial guess and final offer won’t meet eye-to-eye without investment; buyers know what they’re getting into but expect sellers to pick up the tab to make things agreeable. Meanwhile, if a buyer backs out after asking too much without consideration nor acceptance of what’s presented, it’s another loss out of pocket selling costs.
Unavoidable Closing Costs
Sellers also assume some closing costs including title insurance and transfer taxes (if any). Attorney fees assessed in certain states as well as prorated property taxes come directly from proceeds meaning 1-2% of closing costs either go toward subsequent purchases or equity elsewhere, but not both. On a $300,000 house that’s an additional $3,000-$6,000 in seller costs that aren’t avoidable either.
It’s hard to quantify intangible expenses. Opportunity costs include the need to keep a house clean at all times, with no children running around and damaging walls, or consistently encouraging kids to be on their best behavior at a moment’s notice only exacerbates the expenses incurred; psychological expenses take their toll as families now have to schedule walk-throughs with little time to spare in addition to paying for a home they’re not living in anymore (longer).
Ultimately, by properly assessing costs beforehand sellers can understand why 10% of selling price is highly realistic selling conventionally, which means that equity they thought they’d bank upon will never be realized.
On a $300,000 house that’s $30,000 directly lost from equity expected by proceeds check; add 10-20% more depending on how long it stays on the market and thousands of dollars lost each month only makes sense why most sellers get frustrated, but why many skip the traditional selling process completely for other options that make better financial sense without so many hidden expenses instead.
For some sellers it works; for others, especially when time is of the essence, there are better options that will save money instead of taking it away with little promises in return along the way.
