Selling your home is typically about making a proﬁt. However, that doesn’t mean that it doesn’t come without costs. Here is an overview of some of the major costs you’ll be responsible for paying.
This is the remaining balance on your original home loan. You will need to pay oﬀ your mortgage in its entirety when your home is sold.
Home Equity Loans (2nd, 3rd Mortgages)
Any loan against the value of your home will also need to be paid in full after the sale of your home.
The bank or lending institution that currently owns your mortgage title may assess a prepayment penalty. You should speak to your lender now, ask if they plan on assessing a prepayment penalty, and ﬁgure out exactly how much that amount is. You may be able to negotiate with your lender to reduce or waive the prepayment penalty, if there is any.
You’ll also want to submit a formal prepayment notice to your lender.
In most cases, it’s not advisable to make major investments in your home right before a sale. There are however, a few things that can be done to increase your home’s curb appeal, ﬁx minor problems, and otherwise make your property more attractive. Together we can identify what items should be addressed and create a budget for these presale preparations that are sure to show a signiﬁcant return on investment.
All closing costs associated with the sale of your home will be listed for you and for the home buyer in the UD1 settlement form. They buyer is generally responsible for these closing costs which include:
- The real estate broker commissions
- Loan fees for the buyer’s home mortgage
- Insurance premiums
- Title costs (examination and insurance)
- Legal documents and services fees
- Recording/ﬁling fees
In some cases, buyers make a request for you as the seller to cover their closing costs as a part their purchase oﬀer. We will negotiate these requests if they are made and I will help you understand why it would be advantageous to cover the buyers closing costs (if it is) and what limitations we can set to make sure we know the exact net of your home sale before closing.
The money that you make from the sale of your home is considered capital gains. The good news is that these proﬁts can be excluded from your taxable income, up to $250,000 for an individual or $500,000 for a married couple, as long as your home was your principal residence.
To exclude the full portion of those gains, you will need to have lived in your house for at least 24 months in the 5 years previous to the sale date of the property. This is considered the 2 in 5 rule.
If you do not meet the minimum occupancy requirement you still may be able to exclude a portion of your gains if you are selling your house because of circumstances related to your health or to your job. You should speak with your accountant or a certiﬁed tax specialist if you believe you fall under one of the exclusions or need help in reporting your capital gains after the sale of your home.
If this property is a real estate investment your proﬁts will be considered taxable income and will be subject to state, federal and selfemployment taxes. You can defer all capital gains taxes in a 1031 exchange if you are planning to reinvest the proceeds of your real estate sale into a new property.
Again, in this circumstance you should speak to a ﬁnancial specialist who can help you fully understand and minimize your tax liability.
Moving isn’t only a hassle, it can also be very expensive. Whether you’re moving to a new house in your neighborhood or across the country, it’s important to estimate and plan for the full cost of moving from your home once it is sold.
If you’re working with a moving company, you’ll want to get a full idea of what you’ll be charged for what services. If you’re moving yourself, you’ll most likely need to rent a van. And don’t forget the packing materials including boxes and tape.
The more preparation you do in your move planning, the less likely you are to avoid overpaying for your move expenses.