Selling your house is an exciting, and sometimes scary, time. You may have sold things before, but those were nothing like when you sell your house. You don’t just put it up for sale, collect a check, and then deposit the money. You have costs associated with getting your house ready for sale. Unfortunately, putting your house up for sale has its costs. Then, even though someone else is buying your house, there are costs associated with finalizing, or closing, the sale of your house. Most of us don’t do this very often and for some, these costs can be a bit of a surprise if you aren’t ready.
There are some of these costs that can really catch up on you if you’re not planning on them. You expect to end with a certain amount of size and suddenly, you’re the one selling something and cutting checks. Here are some of the costs associated with selling your house that might surprise you.
With big purchases, everyone wants to protect their interests. There is a lot of money changing hands and other interested parties. You may have a bank that financed the home for the seller and they want to make sure they get paid off before the seller gets any money. If a bank is financing the sale, they want to make sure that things like taxes, attorneys, and insurance are covered. The seller and the buyer each want to protect their interests, making sure that the money and the legal ownership of the house being sold are in order.
Thankfully, there are services out there who help protect this transfer of money, for a fee. This is often the attorney or title company. They will do something called escrowing the money. This basically means that they will hold the money in a special account until everything that is supposed to happen for the sale of the house happens. Then, once everything is in order, they release the money. Usually, the buyer and seller split the costs of this service.
If you use a realtor to sell your home, they need to be paid, of course. In fact, you might even have two realtors involved, one for you and one for the buyer. Normally, they will be paid in the form of a commission, which usually amounts to 3-5% of the amount you sold your house for. They’ll figure out how to split it, but that’s money that comes out of the closing.
The government needs its share. This is normally in the form of a transfer tax. Basically, this is a tax on transferring the ownership of the house from one person to another. In North Carolina, this amounts to 0.2%. Before you pull out a calculator, that’s $2 for every thousand dollars that you sell the house for. For a $300,000 house, that’s $600 to the state.
Mortgage Payoff to Sell a House
Before you start picturing yourself swimming in bags of money like a Scrooge McDuck when you get that offer, don’t forget about the people you owe money to, especially the bank. If you have a mortgage on the house you are selling, you’ll have to pay that off before you can collect a dime and the bank will make sure, so will the buyer because the bank will have a lien attached to the house and the buyer won’t let that stay.
Ugly Surprises – Money You Didn’t Know You Owed
For some, the bank may not be the only one you owe money to. For example, remember that contractor you got in a fight with when he installed the door upside down and you never paid? Unfortunately, he attached something called a mechanic’s lien on your house. You may not have even known about it at the time or you didn’t want to deal with taking him to court. Unfortunately, now, you can’t sell your house until it’s clear. The same thing can happen with the IRS, local governments for back taxes, and utility companies. These surprises don’t happen a lot but can be very ugly and take a while to clear.
Know Before You Sell Your House
These are by no means all of the expenses for selling your house which could also include repairs, staging, attorney’s fees and others. It’s worth sitting down with an attorney or ask your realtor in advance so that you know what to expect. Sadly, it’s often not until the closing table that many sellers find out about some of the expenses to sell their home.