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Do you think that the only costs you will have to
pay in order to sell your home are a yard sign and a few newspaper
advertisements? As a seller, there are three categories of
expenses you should expect: 1) Marketing costs, 2) Closing costs,
and 3) Moving costs. To better understand your current financial
position and your ability to negotiate with a buyer you must understand
and be able to estimate the costs associated with your sale.
[ download the sellers estimated
costs sheet here ]
A seller's marketing costs are the expenses
involved in the preparation and advertising of the home. These
costs are dependent upon the amount of repairs and rehabilitation a home
needs, the amount and types of advertising employed, and the value of
the home. The following are common marketing costs to consider:
Repair Costs. Repair costs are
expenses on labor and material used to make the home more salable.
These expenses can range from a new doorbell button to the costs
associated with a bathroom addition. For more information on
common repairs, read the section on
What to
fix or repair.
Curb Appeal Costs. Curb appeal refers
to how attractive the home appears to a prospective buyer.
Traditionally curb appeal is associated with the outside appearance of
the home, but has come to refer to the inside attractiveness as well.
These charges are normally minimal in cost and range from buying
chemicals for pool maintenance to renting a steam cleaner for the
carpets. For more information on the tasks involved with your
home's attractiveness, read the section on
Curb
appeal.
Advertising Costs. Advertising costs
can vary widely, depending on how elaborate your marketing plan is.
Common costs associated with advertising are the yard sign, open house
signs, and sales flyers. Many sellers will spend money on
newspaper advertisements, magazine ads, and internet listings.
Though the cheapest for sale sign I have seen was $9.95 at a local home
improvement store, your advertising costs will probably run in the
hundreds of dollars for a quality yard sign and stand, a couple of open
house signs, color sales flyers and a few newspaper ads. For more
information on the different types of advertising, read the section on
Marketing
your home to sell.
A seller's closing costs are the expenses charged
to a seller by an escrow company, the seller's mortgage company, and
government entities. In the Phoenix market, these
expenses will run approximately one percent of the sales price, on
average, and will vary depending on the type of property, the terms
negotiated, and the type of financing used by the buyer.
The following table explains many of the common
closing costs a seller will have to pay to sell his or her home.
These fees vary from county to county in Arizona.
Mortgage Payoff. Your mortgage payoff
is the current amount you owe against your home plus any additional
administrative fees and any unpaid interest charges. Your payoff
amount is usually determined at the time of closing by the escrow agent.
For a rough estimate, contact your mortgage lender for an approximate
balance and add a couple of hundred dollars for statement fees,
processing fees and other garbage fees that lenders will include in your
payoff statement.
Title Insurance. A title insurance
policy protects a person against any loss caused by clouds,
claims, or defects of title. There are generally two title
policies associated with the sale/purchase of a home. The "owner's policy" protects the
new owner and is paid for by the seller. The ALTA (American Land
Title Association) policy protects the buyer's lender and is usually
paid by the buyer. These fees are determined by the home's sales
price and/or the buyer's loan amount.
Title Endorsements (3R, 5, 8.1). The
basic title insurance policy generally will not include enough coverage
for the buyer's lender. As a result, upgrades to the policy are
added to the title insurance policy. These upgrades are called
endorsements. 3R
Endorsement: Endorsement to the title insurance policy
to guarantee that the property, the building, and any restrictions
were in legal compliance by the planning and zoning commission. 5
Endorsement: Endorsement that guarantees that the
property address is correct. 8.1 Endorsement: Environmental endorsement that ensures
that the property was not built on a hazardous waste area.
This is usually a cost paid by the buyer and costs approximately $60.00.
A few title companies, however, do not charge this fee since it is
already incorporated into the title policy.
Escrow Fee. Fee charged by the title / escrow company to
conduct the closing, prepare any final documents, and ensure that
the proper title insurance policies are ready. This cost is
usually split between the buyer and the seller and is determined by the
sales price of the home.
Courier/FEDEX Fee. Fee charged by the title / escrow company to
cover the cost of any courier or overnight delivery charges.
These charges may include rush delivery of the closing paperwork from/to
the lender, the county recorder, or another third party involved in the
transaction.
Reconveyance Fee. Fee charged by the title / escrow company to
cover the cost to reconvey or record a release of the seller’s
mortgage. This fee usually runs approximately $75.00 for the
first mortgage and $25.00 for each additional mortgage on title.
Prorated Taxes. Depending upon the day
you close, your escrow agent will pro-rate your taxes owed on the home.
This is determined by estimating the amount of time from the beginning
of the year to the day of closing and prorating your taxes accordingly.
For example if your closing date is the end of March, you will owe taxes
from Jan through March.
Recording Fee. Fee charged by the
county to record the deed. For a seller in Maricopa County, the
charge is around $10.00
Affidavit of Value. Fee charged by the county to record the
Affadavit of Value, a document required by law to be filed stating
the value of the home for tax purposes. The charge in Maricopa
County is around $2.00.
HOA Transfer Fee. Fee charged by the home owner’s association to
transfer ownership to the new owner. This fee is usually paid
by the seller and can range from $20.00 to $200, depending upon the
home owner's association. Some associations may also charge a
resale disclosure fee which is an expense to cover the cost of
providing the buyer with up-to-date CC&R's, minutes of the board
meetings, etc. The resale disclosure fee may run anywhere from
$150 to $300.
Non-allowable Mortgage Costs. If your
home buyer is financing the purchase with a VA or FHA home loan, you may
have to pay for the buyer's non-allowable costs. A non-allowable
costs is a mortgage related expense that FHA or VA will not permit the
buyer to pay for, though they are traditional mortgage related fees.
These fees typically include charges for document preparation, tax
service, underwriting, and processing the loan. As a seller,
expect to pay approximately $500 to $1000 for these expenses. For
more information, read the section titled,
How a mortgage
affects the sale.
Home Warranty Plan. Optional. A 12 month “insurance” policy that
covers the cost of repair/replacement of the major electrical,
plumbing, heating, and cooling systems in a home. Additional
or "extended" coverage is available to cover additional AC units, pools,
and spas. Prices usually start around $300.
Real Estate Commission.
Fee charged by a cooperating real estate agent who has found the
buyer. Though many FSBO's do not want anything to do with a
real estate agent, some sellers are willing to pay a partial
commission if the agent finds the buyer for the seller. This
fee is usually determined by agreement between the seller and the real
estate agent.
Finally, a seller's moving expenses, though not a
traditional expense of selling your home, should also be calculated as a
related expense. Generally a moving expense draws upon the cost of
moving from the house to your new home. This includes hiring
movers, purchasing boxes, and travel expenses (especially if you are
moving from one state to another).
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