With everything that goes into selling a house, it’s not uncommon for prospective sellers to overlook the costs associated with it. Some of the expenses are negotiable, but sellers should still expect to cover all (or at least part) of the bill for different costs that are associated with selling a house (including taxes and closing costs).

Selling a house can be time-consuming and expensive – more so than what many sellers would expect. If you’re thinking about selling your home, it’s easy to get excited about how much its value has gone up over the years. But it’s a good idea to be prepared for any hidden costs that can be easily overlooked. Homeowners, on average, spend seven months planning and preparing to sell their home. Then, they spend three more months with their home being listed until the time it closes.

The transaction costs of selling a house include standard closing costs as well as any potential charges associated with getting the home ready for sale, relocating, and offering concessions to the buyer. Closing costs include up to 6% in commissions to both agents (for you and the buyer) as well as another 2-4% in transfer and property taxes, attorney fees, and other real estate costs (such as title insurance, HOA transfers, and escrow fees).

Costs Associated with Home Preparation

While they’re not your typical closing costs, there are some expenses associated with home preparation. Some of them can include the following:

• Cleaning – Before you can have your first open house or showing, you should think about hiring someone to give your home a deep cleaning. You should also have your carpets professionally cleaned and your windows washed.
• Staging – According to Zillow, 48% of recent homebuyers ranked having a home staged as either somewhat, very, or extremely important. Home staging can take a variety of forms. But you should at least declutter, arrange furniture to make the most out of your space, and remove any personal belongings. Little things like having new bath towels, a fresh doormat, flowers, and even cookies can go a long way as well.
• Landscaping – Your home’s curb appeal can give potential buyers a lasting first impression, so you want to make sure your exterior looks its absolute best. Add flowering plants, create a walkway if you don’t already have one, rake any leaves, mow the lawn, and light up the pathways around your house.
• Home Improvements – There are two types of home improvements that you can do before you list it. One of them is updating, repairing, or replacing old systems (such as your roof, furnace, and windows). The other is adding features that would attract potential buyers, which could justify a higher selling price. Ask your agent for any recommendations on what buyers in your area are looking for.
• Professional Photos – More than half of home buyers say that seeing professional-looking photos of a property is somewhat to extremely important. It’s a small investment, but the payoff can be massive. Standard professional photos will cost $150-$200, depending on the market. And if you’re using a full-service listing agent, they might be able to cover the cost for you.
• Marketing Costs – There are costs associated with listing your home, but it’s usually covered by your real estate agent if you’re using one. If you’re selling your home on your own (called “for sale by owner”), you can list your home for free on Zillow. But you also want to set aside some money to print flyers, signs, and open house materials.
• Pre-Inspection – This expense isn’t required. But if you choose to do one before you list your home, you’ll know about any major issues in advance. This can save you a lot of negotiations with potential buyers later on. According to Zillow, 15% of home deals fell through because the buyer backed out after the inspection report. If you pay $250-$700 for an inspection (depending on the size of your home), you’ll have the information you need to determine the right listing price and to negotiate more strategically.

Be sure to speak to your real estate agent for more information.

Cost Associated with Vacating the Home

Other expenses associated with selling your home can be related to the cost of moving, which can include the following:

• Temporary Housing – If you’re selling one home and buying another, it’s almost impossible to time the transactions in a way that will prevent any additional housing costs. No matter where you’re moving to, most sellers will usually have an overlap of about a month and a half when they’re still paying their existing mortgage (in addition to alternative housing costs).
• Utilities – Most sellers will leave their utilities on while their house is on the market, so they can be used for showings and open houses. But make sure you shut them off on the day you vacate the property so you can avoid any unnecessary costs. Your final utility bill should be prorated as of the date of your sale.
• Moving Costs – The cost of moving can vary dramatically based on the size of your home, how much stuff you have, and how far you’re moving. But whether you’re doing a DIY move, using professionals for the entire move, or doing a combination of both, there are always costs associated with moving that will have to be paid before closing. So, make sure you have enough cash available.

Your current homeowner’s insurance policy may not cover your property while it’s not being occupied. So, if it’s going to be vacant for any length of time, be sure to speak to your insurance agent about adding a rider that will cover you for that period.

Common Home Seller Concessions

Very rarely will you get the perfect offer that can close without having to make any concessions to the buyer. According to the Zillow Consumer Housing Trends Report, 83% of sellers make some kind of trade-off with the buyer to facilitate the sale of their home. Some of them can include the following:

• Post-Inspection Repairs – Inspection reports will rarely come out perfect, so it’s common for buyers to ask sellers to make repairs. Sellers will often lower their selling price so buyers can make the repairs themselves, but they may also complete the repairs as a condition of the deal.
• Home Warranty for the Buyer – Sellers will sometimes cover the cost of a home warranty as a way of “sweetening the deal.” This will not only make your home stand out from others on the market but can also boost a buyer’s confidence in your property. A one-year home warranty can cost $300-$500, depending on the coverage.
• Credits Toward Closing Costs – Buyers will often ask the seller to cover all or part of the buyer’s closing costs, which can minimize the amount of cash a buyer needs to bring on the closing date. For sellers, the cost will come out of the profit they make on the home after the final closing.

Be sure to speak to your real estate agent for more information.

Typical Closing Costs for Sellers

The average closing costs for sellers are approximately 8-10% of the home’s selling price. This includes both agent commissions (which is about 6% of the sale price) and sellers fees (which is about 2-4%). With the average home price in the U.S. being about $217,000, that would put the closing costs at about $17,000-$22,000. But they can vary according to tax rates, where you live, and your home’s actual value.

Some of the closing costs for sellers can include the following:

• Agent Commission – The majority of your closing costs will come from having to pay a commission to real estate agents. The seller will typically pay 3% to their agent, but they will also have to pay 3% to the buyer’s agent. You might be able to negotiate the commission paid to your own agent or use a discounted agent who only provides a limited range of services.
• Transfer Tax – Also known as a government transfer tax or title fee, this amount will vary according to the different tax rates in each state and on the home’s selling price.
• Title Insurance – Sellers are usually required to pay for a title insurance policy for buyers, which protects their interest in the home if there are any issues with a disputed title or outstanding liens. These costs can be about $1,000-$4,000 and will come out of your net profits on the closing date.
• Escrow Fees – Buyers and sellers will typically split the cost of escrow services (which is a third-party company that handles the distribution of funds in the sale). This can cost $500-$2,000, which can include office expenses, transfer fees, and notary services.
• Prorated Property Taxes – You’re responsible for the property tax on your home until the closing date, so you’ll see a prorated charge on your settlement statement.
• HOA Fees – If you live in a community with a homeowner’s association, you’ll also be required to pay your dues (which will be prorated up to the closing date). There may also be a fee associated with the transfer of ownership.

Be sure to speak to your real estate agent for more information.

Other Real Estate Fees

After the closing costs have been settled, not all of it is profit. There are still some costs associated with selling a home of which you may not be aware. Some of them can include the following:

• Outstanding Mortgage Balance – If you’re still paying a mortgage on your home, part of the closing process will include paying off the balance (which is prorated to the date of the sale). It might be a good idea to check with your mortgage company to see if there’s a prepayment penalty as well.
• Capital Gains Tax – This is a cost that’s often overlooked (that is, until it’s time to pay your taxes). If you lived in the home for at least two of the last five years, you’ll get a tax break on the profit you made from the sale. This is up to $250,000 if you’re single or married filing separately and $500,000 if you’re married filing jointly. If you think you’re going to have to pay capital gains taxes because your profit was for more than the set amount or because you lived in the home for less than two years, be sure to speak to a tax professional about deducting the cost of preparing the home for sale from your profits.

If you want more information about real estate investing and how you can use it to gain more wealth, be sure to get in touch with Trevor Shakiba at Shakiba Capital.