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.

Florida Real Estate Sales – Contract to Close. I think we’ve got it right.

Real estate sales are different from state to state. Procedures are different, how and when we go under contract is different and who closes the sale differs. I am licensed to sell real estate in Florida. I have never sold anywhere else. Based on stories I have heard, observations I have made and experiences REALTORS from other states have shared with me, I believe Florida has gotten it right when it comes to contract to close procedures.

I have contacts with REALTORS across the country. For the sake of brevity, I am going to discuss Massachusetts and New York in comparison to Florida. It is my understanding that these 2 sales handle real estate transactions similarly.

In Florida, title companies are typically used to close/complete the sale. The title company is a neutral party in the sale. They perform lien searches to ensure there are no liens against the property that a buyer may be held responsible for, make sure the chain of title is clean (no one has claim to the property), order payoffs, prepare and record the deed, etc. They basically close out the sale. In Massachusetts and NY, attorneys handle closings. Attorneys also handle contracts.

In Florida, REALTORS handle contracts. In most instances, contracts that have been contractdrafted and approved by The Florida Bar. The steps of a sale in Florida are pretty straight forward. Buyer finds a house they like, they make a written offer on a contract and buyer and seller agree to terms. The terms are spelled out on the contract. Terms include sale price, closing date, escrow deposit and how it is handled in case of buyer or seller default, inspection periods, financing contingencies (including financing type and loan commitment deadlines), repair limits, etc. It is all spelled out and agreed to in writing by all parties prior to moving forward with inspections, appraisals and loan approval. Once the contract is executed by the buyer and sellers, inspections, appraisal, and all steps that lead to closing are completed.

In Massachusetts and New York, buyers and sellers come to a written agreement on price, inspections are performed, then an attorney drafts the contract to purchase. As an agent that works in residential sales in handshakeFlorida and has only worked in Florida, I find this mind blowing.

Here’s why: I have heard stories of buyers and sellers coming to agreed upon purchase price and finding other terms in the contract that both parties haven’t agreed upon. One example of this includes a change in buyer financing (i.e. going from 5% down on conventional financing to 0% down on a USDA loan). For a seller, this could be alarming. The seller agreed to a purchase price based on one set of terms and is presented a different set of terms at the time of entering into contract. Terms that could appear less appealing or “safe” than what was anticipated. Another example I have heard is buyer and seller agreeing to a contract price and when the contract is presented, buyer sees a clause stating they would lose their entire escrow deposit if financing was not in place within 20 days of contract. (most lenders need 30-45). I’m sure most times these items can get ironed out. Sometimes they don’t though. Sometimes weeks can be lost “renegotiating” terms that, in Florida, would have been ironed out up front – before a buyer invests time and energy on the house and more importantly spends hundreds of dollars on inspections.

I am grateful to be able to sell real estate in Florida. It seems to me it is more cut and dry, straightforward, and certain when a buyer and seller have a binding contract with all the terms to the agreement spelled out prior to any actions being taken. I can only think it cuts stress levels, too. If I were selling real estate in MA or NY I may think differently.  As a Florida Realtor, I would be extremely hesitant to allow a buyer to spend monies on inspections prior to being in a fully executed contract. I understand an agreement has been made by the parties in NY and MA, but without having all the terms to the contract laid out and agreed to beforehand seems like a risky endeavor to both parties in the transaction.

I’d be interested to hear from other REALTORS about contract to close procedures in your state, and what I’ve gotten right and what I may have gotten wrong about sales in MA and NY based on the information and examples provided to me by other in the field.

Executive Vice President of Large & Influential Mortgage Holding Corporation says We Are Not Creating Another Housing Bubble. What Else Would You Expect Him to Say?

Rick Sharga, executive vice president with Carrington Mortgage Holdings, made the claim “we are not creating a bubble” during his keynote speech at the REOMAC 2013 Summit & Expo in Dallas on Monday.  (REOMAC stands for Real Estate Owned Managers Association of California).

Currently in the Orlando area, we are seeing a lack of inventory and a surplus of buyers.  Prices have been increasing steadily and bidding wars are all to common.  We are seeing a bubble in housing.  Is it as big as the Boom Bubble?  No.  Will the effects of this bubble burst be as hard felt as the Boom Bubble?  I doubt it.

I believe bank owned property holders and their affiliates as well as the federal government are contributing to this bubble.  Sellers with equity are as well, and to an extent I can’t blame any of the parties for doing it.

Sellers with equity are holding out to see where the market is heading.  Many “don’t have to sell” and can sit back and wait a little while to see where this market is going – with all assumptions that it will continue going up.  On a side note, I do caution these sellers that don’t have to sell but would really like to not to hold out too much longer.  One way or another, this mini boom will come to an end and the market will adjust accordingly.  Market On Fire

Bank owned property holders and their affiliates are contributing to and helping to create this bubble by keeping a stranglehold on inventory; releasing properties to the market at a trickle and pushing up prices.  I can attest to this as many others in our area can as well.

In just about any neighborhood in the Orlando area, you will find at least one home in a neighborhood that has been sitting vacant for a long time.  The house next door to mine has been owned by Bank of America since April 2010.  Bank of America has not made a single attempt to sell it in all that time.

This is fact around here, and it is kind of a shame when ready, willing and able buyers are out there putting strong bid after bid on homes only to be beat out by cash investors or stronger offers.  It is not accurate for Rick Sharga, executive vice president with Carrington Mortgage Holdings, to say that “we are not creating a bubble” when bank owned inventory (also known as REOs or foreclosure) is being trickled onto the market.

When one state out of 50 holds 16% of the distressed properties and there are 2.2 million units of shadow inventory lingering in our country, more needs to be done to resolve this matter.  Florida seems to be being used as a testing ground for what can and can’t be done by REO managers.  The small amount of bank owned inventory being released to the market is typically coming on 10-15% above current market value, and cash investors are pretty much paying it —- for now.

I can understand why the powers that be are doing it.  They do not want to flood the market like they did at the beginning of this mess and drive prices into the ground.  They want to help push prices up, and work their losses down.  But there is a happy medium somewhere.  It seems to me that big banks and corporations don’t understand the word moderation or believe in middle ground.

Banks are pushing this bubble – no matter how many times or how many ways they say they are not.

The Government is also contributing to this bubble by keeping interest rates low.  Chairman Ben Bernanke says he is going to keep rates low through 2014.

Do I understand why banks and the Fed are doing this?  Yes.  It makes sense.  Flooding the market and letting interest rates rise will not help us get through this.  Do I think the methods are a little extreme (and maybe even a bit greedy)?  Yes.  Give us a little more inventory to work with and work through.  Give more buyers, especially families dependent on financing, a chance.  I am for increasing values.  I would love for my home, and everyone else’s home, to be worth what it was in 2007.  Let’s get there a little more naturally though, and with a little more heart.  We have seen what artificially inflated prices has brought in the past.  Let’s not do that again any time soon.