Guide to Selling a Home
Costs of Selling Your Home
Selling your home is about making a profit. However, that
doesn't mean that it doesn't come without costs. Here is an
overview of some of the major costs you'll be responsible for
This remaining balance on your original home loan. You
will need to pay off your mortgage in its entirety when your
home is sold.
Home Equity Loans (2nd, 3rd Mortgages)
Any loan against the value of your home will also need to be
paid in full after the sale of your home.
The bank or lending institution that currently owns
your mortgage title may assess a pre-payment penalty. You should
speak to your lender now, ask if they plan on assessing a
pre-payment penalty, and figure out exactly how much that amount
is. You may be able to negotiate with your lender to reduce or
waive the pre-payment penalty, if there is any.
You'll also want to submit a formal pre-payment notice to your
In most cases, it's not advisable to make major
investments in your home right before a sale. There are however,
a few things that can be done to increase your home's curb
appeal, fix minor problems, and otherwise make your property
more attractive. Together, you and your real estate agent can
identify what items should be addressed and create a budget for
these pre-sale preparations that are sure to show a significant
return on investment.
All closing costs associated with the sale of your home will be
listed for you and for the home buyer in the HUD-1 settlement
form. The buyer is generally responsible for all of these
closing costs which include:
• The Real Estate Broker commissions
• Loan Fees for the Buyer's home mortgage
• Insurance Premiums
• Title Costs (Examination and Insurance)
• Legal documents and services fees
• Recording/Filing Fees
In some cases, buyers make a request for you as the seller to
cover their closing costs as part of their purchase offer. You
and your agent will negotiate these requests if they are made
and you agent will help you understand why it would be
advantageous to cover the buyers closing costs (if it is) and
what limitations you can set to make sure you know the exact net
of your home sale before closing.
The money that you make from the sale of your home is considered
capital gains. The good news is that these profits can be
excluded from your taxable income, up to $250,000 for an
individual or $500,000 for a married couple, as long as your
home was your principal residence.
To exclude the full portion of those gains, you will need to
have lived in your house for at least 24 months in the 5 years
previous to the sale date of the property.
This is considered the "2 in 5 rule."
If you do not meet the minimum occupancy requirement you still
may be able to exclude a portion of your gains if you are
selling your house because of circumstances related to your
health or to your job. You should speak with your accountant or
a certified tax specialist if you believe you fall under one of
the exclusions or need help in reporting your capital gains
after the sale of your home.
If this property is a real estate investment your profits will
be considered taxable income and will be subject to state,
federal and self-employment taxes. Again, in this circumstance
you should speak to a financial specialist who can help you
fully understand and minimize your tax liability.
Moving isn't only a hassle, it can also be very
expensive. Whether you're moving to a new house in your
neighborhood or across the country, it's important to estimate
and plan for the full cost of moving from your home once it is
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