If you sell your house for $300k, how much would you get? If you're thinking of selling your house, it is important to know that there are a lot of deductions in the sale proceeds before the money reaches your bank.
The deductions may include real estate commissions, closing costs, mortgage payoff, repairs and buyer concessions, and other expenses. Here is the breakdown of cost to understand how much net proceeds you can expect after all the deductions in the sale price.
Understanding Net Proceeds and Sale Price
The total amount that a buyer agrees to pay to the seller is the sale price and the amount a seller receives after all the deductions from the sale price are termed net proceeds. The amount a seller gets to keep varies depending on the various deductions. For example, the average real estate commission ranges between 5%-6%.
The real estate commission will be paid from the sale price, which, ideally, is $300k. Additionally, there are more factors, such as closing costs, which are also paid from the sale price. Then, the rest of it would be the net proceeds, which would be your profit.
Costs to Be Paid for Selling Your House
Here are the various costs that the seller will have to bear when selling the house. However, there are some expenses that may vary depending upon the services taken by the seller.
Real Estate Commission
The typical real estate commission may range between 5 and 6 percent of the sale's price. If you sell your home for $300k, you would likely pay the total commission between $15k and $16k.
Staging
If your house is cluttered from the years of living or if you have already moved out, staging is what keeps the house appealing to the buyers. It is a home upgrade like adding lighting, decorations and so on. You can consider hiring a professional to make it more eye-catching to buyers.
Inspection Before Marketing
It is not necessary, but it is a useful option to do a house inspection before listing it for sale. It helps to understand and identify the issues that need to be fixed before putting it up for sale. The cost of inspection will probably be a few hundred dollars. However, if there are any material defects during the inspection, you might have to reveal them to the buyer, as per your state's disclosure laws.
Closing Cost
It costs around 2% to 10% of the sale price, making it the biggest expense while selling a house. It includes insurance, transfer taxes, HOA fees, attorney fees , mortgage points, prorated property tax, and other expenses. In the case of a $300k sale, closing costs would amount up to $6k-$30k.
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Mortgage Balance - The Amount that you still owe to the house is termed mortgage payoff. Additionally, if you had the ownership of the house for a long time or most importantly, the value of the house has increased then, the mortgage amount will be lower than the sale price.
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Attorney fees - In many states, hiring a legal attorney is necessary. However, even if it's not required in your state, it's better to get the transaction reviewed by a legal expert. This is important to ensure your interests are well protected, especially when it comes to contracts.
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Prorated Property Taxes - Homeowners are responsible for the prorated taxes throughout their ownership period until the day of closing. Correspondingly, the rule applies to the HOA fees if the property is part of a homeowners association.
Net Proceeds Calculations
After adding the cost of all expenses and services and then subtracting it from the sale price, which here is $300k, represents your net proceeds.
For reference,
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Cost of Agent commission - $18,000
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Closing costs - $30,000
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Mortgage payoff - $100,000 (if you owe a larger sum)
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Staging - $3000 ( only for calculation purposes; you might have to pay more or less depending on the number of renovations or repairs)
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Total amount ( after adding ) = $151,000
Sale price - all the expenses = Net Proceeds
$300,000 - $151,000 = $149,000
Ways to Maximize Your Profit
Here are some ways to get more profit from the sale price.
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Negotiation - Some agents might agree with lower commissions than 6%.
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Minimize repair cost - Give attention to those repairs that earn higher return on investment (ROI).
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Closing costs comparison - Look around for the best rates by different service provider companies.
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Market timing - Sell the house during the peak seasons like summer or spring to earn higher profit.
Conclusion
Selling a house requires an in-depth understanding of the terms like sale proceeds and net proceeds. There are multiple costs to be paid, such as real estate commission, inspection, staging, etc., which reduce the sale proceeds. All these will help you assess the amount you can get after selling the house for $300k.
