“Hi Gary, I heard somewhere that it costs about 7% to sell a home: 6% for the Realtor and 1% for other costs like the title and escrow companies, etc. Are there any hidden costs I should look out for?”
***ANSWER:
There are several categories of items that you be aware of:
1. Costs of OWNING
a) Prorated Interest Your loan payment is paid in arrears (your June 1 payment pays for May), so youll likely have to pay some accrued interest on your loan(s) at closing.
b) Prorated Property Taxes You may have a credit or debit of several months of property taxes, depending on when you sell
2. REPAIR Costs
a) Misc Repairs Nowadays, buyers have home inspections and ask for repairs. It’s part of the process and you should expect that youll have to pay for some. Expensive fixes are foundation or roof problems.
b) Pest Control (Termite) Not legally required, but 99% of buyers expect a full clearance. Get a report early and avoid surprises.
3. TAX Costs & Withholding
a) Income Tax – Lived in and owned the house for at least 2 of the past 5 years? You’re most likely exempt. If not, talk with me AND see your tax professional.
b) FIRPTA & Cal-FIRPTA – U.S. and CA taxpayers are exempt. Otherwise the feds or state may withhold funds from your sale.
4. MISCELLANOUS
a) Prepayment penalty You probably dont have one. But double check your loan papers to be sure. Find your Note or Trust Deed Note. FYI: It MUST say the word NOTE or you are NOT looking at the right document!
b) Liens & Judgments – Forgotten or erroneous items can crop up and must be paid or dealt with.
c) Closing Delays This could cost you added interest, taxes, insurance, & maintenance.
