Costs involved in Selling a Home

When you are ready to sell and talking with a REALTOR about listing the house, s/he should include the estimated cost involved in selling at the listing appointment. What I typically do is provide a breakdown at 3 or 4 different price points from projected sale price to worst case scenario. To date, my sellers have never been confronted with a worst case scenario net, but I believe it’s important to include that information up front since we should all work towards the best while being prepared for the worst.

Knowing these costs up front helps in preventing any surprises down the line. Real estate transactions are delicate matters. Scenarios can change from day to day based on inspection results, appraisal results, buyer financing, lender productivity and more. Eliminating surprises should be a priority for an experienced agent. Surprises in day to day life can be exciting and fun. Surprises in real estate transactions typically are not.

Educating a seller on the costs to sell up front is one of the steps I take to eliminate surprise. Imagine going through the process of selling and reviewing the settlement statement (HUD) 30-45 days after entering into a contract and learning you are walking away with less than you anticipated. That’s not a fun surprise by any means. That is why it is important to know these numbers at the time of listing.

Since I believe knowledge is power and in educating sellers and buyers, I am going to share these costs with you.

Cost to sell a home in Central Florida are as follows:

Real Estate Commission this is what you and your agent agree upon. The commission is typically shared evenly between the listing brokerage and the selling/buyer’s brokerage.

Documentary stamps on the deed. This seller cost is based on the sales price. It is calculated at 70 cents per one hundred dollars. Example: Sale price of $250,000 = $1750 in doc stamps on the deed. (250000 x .007)

Taxes are pro-rated. (If your taxes and insurance are escrowed into your mortgage, those escrows will be returned to you by your lender once the mortgage is paid (satisfied) – typically 45-60 days after closing.) In Florida, taxes are paid in arrears. Tax bills for the current year come due in November of that same year. At closing the taxes are pro-rated to reflect this; a seller will give the buyer a credit towards taxes for the number of days the seller had ownership in the house. Example – 2015 taxes total $1800. Property sells on May 1, 2015. Tax bill comes due on November 2015. Seller gives buyer a credit of $600 for January-April 2015. Buyer pays the entire tax bill when it comes due.

Owner Title Insurance and fees are also a cost in the transaction. In this region, the seller pays for and conveys clear title to the buyer. The cost of insurance is based on the sale price of the property. If a seller is selling a home that was owned for 3 years or less, a re-issuance credit may be available. The chart below shows title insurance fees without any credit being given.

Courtesy Metes & Bounds Title Co.
Courtesy Metes & Bounds Title Co.

Title fees vary from company to company and include costs for title search, lien search, recording fees, government fees and the settlement fee.  As a rule of thumb, I quote $725 for title fees.

Home Owner Association (HOA) dues is another item that is pro-rated. In order for the dues to be properly pro-rated, the title company must order an estoppel letter from the HOA. The estoppel letter shows what the seller has paid for HOA dues to date, any outstanding balance or fines, etc. HOA’s charge for this estoppel. These charges vary and generally run between $50-$500. I have seen them to be $150 on average.

And those are the standard costs of selling a home.

Simplified it is as follows:

$250,000 Sale Price
Commission                                                                       $X
Taxes $1800/yr (pro-rated: estimated closing 5/1/15)   $600
Doc stamps on deed (.70 per $100)                               $1750
Title Fees ($725) & Insurance ($1325)                           $2050
Cost to sell                                                             $4400 plus X***

***HOA estoppel fees (cost for payoff from HOA to title co.) generally run between $50-$500. I have seen them to be $150 on average. This cost has not been included in the cost to sell calculated above as the exact amount of the estoppel fee for your HOA is not known.

Calculating the cost to sell is not especially tricky. As I mentioned previously, any agent you interview should have these numbers available and should be providing these figures to you at the initial meeting. If s/he is not, then you are not getting the full picture. Hopefully, I have made these costs clear and easy to calculate. If you have any questions regarding the cost to sell, feel free to get in touch with me. I’d be glad to assist in any way I can.

Foreclosure Prices Rising For All The Wrong Reasons

NAR’s REALTOR Magazine just released an article about the rising sales price of foreclosures. This should be good news. In a number of cities and states, including my Orlando area market, we have seen an increase in sales prices. What we have also seen is a decrease in supply. Supply of homes for sale over the past year has dropped significantly. The supply of bank owned (REO) properties for sale has dropped even more dramatically over the past year. It is not for lack of supply. Those of us in the hardest hit states (FL, AZ, NV, CA) don’t need to drive too far before seeing a vacant home that has been owned by a bank for months or more that is just sitting, sitting, sitting. On a personal level, I have a neighbor who has been living in a home that has been owned by Bank of America for about 2 years now. When they will list it for sale is a mystery.

This limited supply of inventory has caused frustration for many buyers in the market. There is not as much to chose from as there has been in the past and competition is fierce. Multiple offers abound and cash buyers often beat out buyers who are in need of financing to secure a home. This lack of supply has helped to prop up the market and bring us some increases in sales prices.

Banks have been controlling the real estate market for a while now, and it seems they like to go to extremes.

When the market first crashed, banks flooded us with inventory and values plunged to a disgustingly low level. Now, banks are doing the opposite. Banks have a strangle-hold on inventory and are trickling it out to the public ever so slowly. The inventory they are releasing to the public is being priced 10-20% above market. Some of the inventory is move in ready which may help justify paying a little more for a property that needs nothing but there is a portion of this overpriced inventory that really needs some work – new roofs, work on plumbing, significant updates. No matter how you slice it, these properties are not worth the price they are being listed at. I understand the logic behind it, but really? What ever happened to moderation. Let’s get a supply out there that matches demand so we can really get down to stabilizing our market.

Instead, banks trickle out supply to try and get the general public to pay top dollar for a new home or investment property while privately selling properties in bulk to investors (possibly cronies?) at rates below market. Doesn’t seem right to me….