Talk to anyone who's sold a home, and you'll probably see some eye-rolling as they recount how the supposed profits were undercut by one expense after another. But the results won't seem quite so shocking if you know what to expect. In fact, with advance planning, you might find ways to reduce some of these costs, perhaps by handling certain tasks yourself or getting lots of competing bids for work.
Below, we'll look at both common preparatory costs and transactional costs.
Seller's Costs Before the Home Sale
Here are the typical upfront expenses in selling a piece of real estate. Some are a matter of choice, yet could be important investments in making sure your house sells for the highest amount possible—or that it sells at all.
- Painting. A new paint job is one of most cost-effective ways of freshening a house up, inside and out. If you've recently painted, you're probably all set—though if your color choices were bold or unique, you might want to tone them down with some crowd-pleasing neutrals. Your home stager, if you hire one (see below) can help advise on the best colors. It's possible to save money by doing some of the painting yourself. Hiring someone will quickly run into the thousands of dollars. Reported averages of around $3 per square foot of paint are typical for both interior and exterior painting.
- Window washing. Clean windows really increase the amount of light entering the house and the overall impression of cleanliness. Because most of us neglect cleaning our outside or high panes, we're accustomed to dingy windows—making them sparkle will have a positive (and perhaps unconscious) impact on buyers' perception of the house. Hiring someone will cost in the range of $150 to $350, depending on the size and height of your home and whether any windows are in high or hard-to-access places. Or, if you have accessible windows (or feel comfortable with heights), you can wash them yourself using a few simple tools.
- Home repair. Which fixups are necessary (such as replacing cracked windows or stained carpeting) and which (such as major remodels) should be left for the buyer to handle is a separate discussion in itself. But there's practically no house that couldn't use some quick maintenance to make it look cared for. Make the buyer's home inspector's job easy by taking care of some of the most common repairs that inspectors encounter.
- Home staging. Staging your home, in other words, having a decorator advise on decluttering and reorganizing, and (in some cases) refurnish it after you've moved your stuff out, can impress buyers in a big way. Studies show that buyers tend to pay more for staged homes. If you enter into a contract with a professional home stager, expect to pay in the thousands of dollars for services (potentially a bit less if some of your own furniture is usable). Even if you decide to save money by staging your own home, you want to make it look its best. Easy but effective measures include buying a new doormat, plush towels for the bathroom, flowers for home showings, and so on. Other good possibilities include new couch cushions, area rugs, a nice table runner, and artwork to replace a wall of kids' photos.
- Landscaping. Buyers are increasingly interested in the state of the garden. If it's already fully planted, you'll want to hire someone (or put in some sweat equity) to get it raked, pruned, and otherwise tidied up. If the area hasn't been landscaped, plan to add new greenery and flowering plants. (By the way, if you plant in containers, you can take these with you when you move; unless they're so big or incorporated into the property as to be considered "fixtures.") Many sellers simply put in new sod; but do the buyers a favor and don't leave the plastic mesh backing on it, in case the buyers want to replace it with something more interesting and environmentally friendly.
- Pre-inspection reports. Having a professional inspect your house for either termite/pest damage or other structural matters before putting it on the market isn't required, nor expected in most parts of the United States. Buyers expect to pay for their own inspectors, and in fact might prefer to hire ones they know and trust. Yet there are situations where you might want to have the house inspected before letting buyers in, for example, if you've owned the property for many years and wonder whether problems have arisen "below the hood" that you're oblivious to. That also gives you a chance to fix problems before buyers can get upset about them. Inspections will run you around $400 and up, depending on the size of the house.
- Lights and heat while the house sits empty. If you'll be moving out before putting your house on the market, expect to pay double utilities for a while. You'll want to leave the lights and heat on in the house for sale, or program them to stay on during hours that potential buyers and their agents might be stopping by the place. No one likes to enter a cold, dark house and fumble around for the light switches. Check your current bills for approximately what to expect.
- Extra homeowners' insurance for the vacancy period. Check with your carrier: Your homeowners' insurance might not apply when the home is "vacant" (as defined by your policy). You can ask for a rider to cover any period of vacancy.
Costs at Closing of Home Sale
The good news is that most of your costs at closing will be paid out of the sale proceeds. The bad news is that you'll be saying goodbye to some big dollars.
- Real estate agent commissions. If you decide to work with a real estate agent rather than do FSBO (for sale by owner), you will likely be paying the entire commission, to be split between the buyer's agent and yours. Although working with an agent doesn't cost you anything up front, the commissions you pay at closing will be one of your biggest expenses. The traditional amount is 5% - 6%, though the industry is in flux, thanks to recent (2023) lawsuits and increased public attention regarding whether these amounts are fair.
- Other closing costs or credits to the property buyer. You might have agreed, based on local tradition or buyer negotiation, to pay some of the standard costs associated with closing the deal. These might include fees for the escrow company; the mortgage and home appraisal; recording and transfer of the property; homeowners' and title insurance; and more. If your local real estate market is sluggish, buyers might also ask you to pay all or a hefty portion of the closing costs, which typically add up to 2% to 5% of the selling price.
- Transfer tax. Your city or state might require you to pay transfer taxes, as a small percentage of the sale price.
- Property taxes. If your state collects property tax, and you haven't yet paid them for that year, you should be charged a prorated share of what the buyer will eventually owe.
- Home warranty for the buyer. Whether because the buyer requests it or to make the buyer feel secure about the home purchase, many sellers buy a home warranty on the buyer's behalf. This is a service contract that covers repairs to appliances and certain systems within the house for the first year of ownership. It will cost about $500.
- Capital gains tax. If you earn less than $250,000 on your home sale (or $500,000 if you're married and filing jointly), don't worry. You won't owe a thing in the way of capital gains taxes. But if your profit goes higher than that, you'll need to look further into the matter. Once you've subtracted things like the costs of preparing the property for sale from the supposed gains, you might not owe the tax after all. (Or if you do owe, read Paying Capital Gains Taxes When You Sell Your Home.)
- Moving costs. Asking your friends with pickup trucks to help can save you some dough, but will take a lot more time. Sometimes it's worth paying for the deluxe treatment, where the company packs your boxes for you, transports them to the new location, and unpacks at the other end.
For more information on all aspects of marketing and selling your home, see Selling Your House: Nolo's Essential Guide, by Ilona Bray.