As a home seller, you need to know: What’s my profit from the home sale?
Knowing the expenses involved in selling a home will help you understand how much you can expect to get from the sale of your home.
REAL ESTATE COMMISSION: This is the amount agreed between you and the listing agent when the listing agreement was signed. This commission is split between the listing and selling brokers at closing.
CLOSING COSTS: It’s not uncommon for a buyer to ask the seller to pay closing costs. This is an expense to the buyer for obtaining their financing, plus expenses that must be paid at closing. These expenses include a homeowners insurance policy plus prorated taxes and insurance to establish the escrow account so there will be enough money to pay future bills.
PRORATED TAXES: Property taxes are paid at the end of the year (October or November) for the current year. If your home sells during the year prior to payment of the tax, you will owe for the months you own the home. If the taxes have already been paid, you will get a credit on the settlement statement for months remaining in the current year.
OTHER EXPENSES: The most common other expense is the home warranty. This can be requested by the buyer or offered by the seller as an incentive, especially when the home being sold is older or has older systems that may be near the end of useful life.
MORTGAGE PAYOFF: The balance on your current mortgage, home equity loan, or other loans connected to your home must be paid off at closing.
After these expenses are deducted, a check for the balance is written to the seller, from the closing attorney’s escrow account.
The escrow account balance will be refunded by the mortgage company. And, don’t forget to cancel your homeowners insurance… that usually results in another refund.