As a real estate professional, I have often been asked to provide a Market Analysis for potential sellers prior to listing a property. Included with that market analysis report, I always provide an estimate of selling costs. This allows any potential seller to visualize what their actual net proceeds will be if the property sells within the value range indicated by the analysis.
Many brokers simply offer a percentage (usually 9–10%) of the list price (or none at all) as an estimate of what the cost to the seller will be, without detailing those costs or discussing them. Since the equity in a property is possibly the single biggest asset that most people have, it makes sense to me that they would want to see how the actual costs break down in a more detailed format.
Based on the purchase price or projected sales price, a seller will be obligated to pay all or most of the following costs: state excise tax, title insurance, closing fee, real estate broker fees (listing agent portion and possibly buyer broker portion), prorated property taxes, septic tank pumping and certification, well report (quality and quantity), recording fees, open space compensating taxes, utility holdbacks, and possibly all or part of the buyer’s closing costs.
Once you know the approximate closing costs, and you know what your mortgage balance is, you can then calculate what your approximate net proceeds should be. Remember that knowing the approximate loan balance is different from knowing the actual payoff amount, since interest is often added to the payoff balance at closing.
A common lending practice in this region, where there are many VA and FHA borrowers, is for the buyer to ask the seller to pay all or part of their loan closing costs, which could be in the range of 3–4% of the purchase price. Many sellers cringe at this thought until they understand that a large percentage of buyers fall into that category.
When you do sell your property, the closing company will prepare a detailed breakdown of your actual costs to close. If your broker has done their job, none of these costs will come as a surprise.
Ask your real estate professional to provide a detailed written estimate of selling costs prior to listing your home! Don’t let an inexperienced or lazy broker keep you in the dark.