Let’s take a hypothetical homebuyer – we’ll call him Steve – and figure out exactly how much it will cost him to sell his imaginary home. We’ll assume that Steve bought his home in 2007 here in Middle Tennessee for $265,000. Now, 10 years later, after a big dip in 2008 and 2009 and some steady gains beginning in 2014, Steve decided to list his house for $365,000; his home is now under contract for $362,000. Go Steve!
Steve was a smart seller and decided to list his home with a real estate agent because he knew he wanted to sell his home quickly, without having to deal with all of the hassles that often come with listing, negotiating and selling a home. Because of this, Steve will owe his real estate agent 3% of the home’s selling price, or $10,860. Not a small amount, but one that Steve budgeted for ahead of time and felt was worth it. Steve’s house was purchased by a couple who also used a real estate agent. Because the seller typically pays for the buyer’s commission as well, Steve also owes their real estate agent $10,860.
Steve has budgeted that closing costs should cost him around 2% of the selling price of his home. In this case, he’s hoping that his final costs will be around $7,240 or less. Some things he expects to pay for are the title transfer tax which should be around $1,300 and the closing fee, which is usually a flat fee around $500. When Steve adds in the prorated property taxes he needs to pay along with the other various closing fees, he ends up at the $7,200 mark as expected.
Thankfully capital gains taxes don’t apply to Steve’s home sale. Steve did not make a profit over $250,000 on his home and lived in his home more than two of the previous five years so he doesn’t owe anything extra to the IRS.
So Steve ends up paying around $28,960 to sell and close on his home. He also is moving across the city and has to pay about $25 per hour per mover, which translates to approximately $600 after paying 4 movers for 6 hours one Saturday. In the end, Steve pays just shy of $30,000 to sell his $362,000 house, or a little less than 10% of the home’s value.
We hope this hypothetical example is helpful for you in figuring out just how much it might cost to sell your next home!