How to Maximize Profit When Selling Your House
“This is a seller’s market!”
“Home prices are up and the inventory is low.”
“Remote workplaces are driving people to look for larger spaces and better amenities.”
All of these current market indicators are driving people to explore the value of their homes and consider placing their homes on the market. The hope is for a bidding war on “Home Sweet Home,” which drives the price into the stratosphere. Online real estate apps give some pretty convincing arguments. So, is this a good idea for you?
Homeowners have many reasons for selling a home, including those listed above. Relocation and a change in family status/size are still leading triggers for a change in residence. If you have a good reason to sell, you should also know some of the potential fees associated with selling a house, and each of these fees is subtracted from the seller’s bottom line. As you prepare to sell, first consider these fees many homeowners pay, as they may temper any potentially impulsive decision.
- Selling Your House Tip 1: First, Pay Off the Mortgage. In order for you to realize a profit from your sale, you must pay off your original mortgage, if you are still paying. This will also include any second mortgage or outstanding home equity credit. Most people assume their home has increased in value, so couple your visions of profitability with a call to your mortgage holder to determine the payoff amount. Remember, if you cannot sell the property for more than the payoff, you will need to make arrangements to cover the difference to closing.
- Selling Your House Tip 2: Realtor Fees. Real estate agents make selling a home MUCH easier and the seller is usually responsible for a fee equal to 5-6% of the sale price. For a house that sells for $295,000, prepare to pay between $14,750 and $17,700 in realtor fees. What are you paying for?
- The professional networking your real estate agent has developed over years of experience
- Knowledge of local market trends
- The time to talk to potential buyers on your behalf and show up for viewings or selling events
- An arsenal of selling tools, including online selling tools
Often, this is the only fee sellers are aware of, so they choose to sell the house on their own. The result can be a significantly lower offer. A better option is for the seller to work with a realtor on ways to increase the value of the house to achieve the desired profit.
- Selling Your House Tip 3: Renovations, Repairs, and Home Inspections. Often, increasing the asking price requires repairs or renovations. Making these decisions require a bit of balance; talk with your real estate agent concerning renovation choices.
- Some renovations are expensive—so make sure your renovations will be profitable
- Some renovations still use your taste—renovate with potential buyers in mind
- Of course, make necessary repairs, since a home inspection will identify them. Waiting for the inspection can create delays or result in a lost sale.
The average home seller spends 5% of the sale price on repairs, renovations, and home inspection; consider this number as you estimate your equity pay-out.
- Selling Your House Tip 4: If you choose not to inspect the house prior to listing or if you choose not to make repairs, expect to make concessions in the asking price, especially repairs identified in the home inspection. These concessions are a part of the negotiations; much will depend upon how motivated both buyer and seller are about the house.
- Selling Your House Tip 5: Staging Fees. Potential homebuyers are encouraged to envision living in the home. Two obstacles stand in the way of this envisioning:
- The current owner’s belongings make it hard for potential buyers to envision their belongings in the spaces.
- An empty residence makes it hard for potential buyers to envision their belongings in the space.
One solution is to stage a minimal amount of furnishings to help buyers envision the space. In fact, a staged home sells for an average of 17% more than an un-staged home. Your realtor can suggest a local firm to help stage your home. On average, staging can cost between $500 and $2000, depending upon the size of the house and the detail of the staging.
- Selling Your House Tip 6: You May Owe Taxes. There are two taxes for you to be aware of to monitor your total profitability.
- Property taxes are generally paid in advance, often attached to your mortgage payment, and held in escrow until the tax is due. The tricky part is that you owe the taxes until the closing date, so watch for a potential property tax line item on your final payout sheet.
- A few homeowners will owe capital gains tax on the sale price. The first $250,000 of profit is exempt ($500,000 if filing joint returns). Profit above this threshold might be subject to a federal capital gain tax.
- Selling Your House Tip 7: Closing Costs. Typically, the closing costs range between 2% and 4% of the sale price: for a house that sells for $295,000, closing costs should range between $5,900 and $11,800. While the buyer is responsible for these costs, a motivated seller might pay a portion or all of the closing costs. Again, this is a part of the negotiation.
- Selling Your House Tip: Overlap Costs. The transition between moving out of one home and moving into another is often a matter of timing. It might result in paying two mortgage payments for a time or require a short-term rental for a few months. Talk with your real estate agent about transition options and anticipate a fee equal to 1% of the sale price.
- Selling Your House Tip 9: Don’t Forget Moving Costs. Your move might be across town or across the country, so the cost will vary accordingly. Be sure to factor moving costs into the sale budget.
Maximize Your Profits When Selling Your House
With over 5 decades of experience in the Houston Housing Market, The Matthews Team is ready to help you complete Selling Your House. If you have any questions, give us a call at 281-440-7900 or send us an email. We’re happy to help!