Closing day has finally arrived for your home sale and no one can blame you for being excited to receive your check. After all those years of housing price growth and diligent maintenance, your smart decision to invest in home ownership is about to pay off! However, before you start mentally spending that money, it's important to remember that not all of it is going to be pure profit; there are expenses that will have to come out of the gross selling price first. Keep reading to learn about the final costs that you will see deducted from your profits as a home seller.
Your Remaining Mortgage Balance
The largest and most obvious drain on your sale's profits is your existing mortgage balance. If you bought the home fairly recently or sold for a lower than expected price, this could eat up most or all of the selling price. In a worst-case scenario, you will have to actually write an additional check yourself to cover the remainder. Conversely, if you have been paying off the mortgage for many years and/or sold for a large amount above your original purchase price, this expense will be relatively minor.
Commissions
The real estate agents' commission is the next expense to deduct from the sale's earnings. You and your agent will have agreed on a percentage when you initially hired them to sell the home, with typical amounts being 5 or 6% of the selling price. If this seems like a lot, keep in mind that the commission is used to pay both your agent and the buyer's agent, who have each worked hard to make your home sale a reality!
Other Closing Costs
The term "closing costs" refers to the variety of fees and taxes that are paid to finalize a home sale. Sometimes you will see the commission itself included as a closing cost, but it is more often accounted for separately (as is the case in this post). Typically, closing costs equal around 2-5% of the total purchase price and are mostly covered by the buyer; however, there are some fees that fall on the seller. For instance, any property taxes which are owed on the house will be paid by the seller, since they were the ones living in the house at the time. As part of the sale's negotiations, buyers can also ask the seller to pay a greater share of the total closing costs. You can learn more about closing costs here.
Although this post can't account for all the specifics of your particular situation, it should give you an idea of what to expect! Hopefully, even after paying these expenses, you will still have a nice chunk of change left over to enjoy after you've moved on to your next home!
