If you are selling your house you are most likely considered with how much money you are going to walk away from the closing table with. Calculating your net profit isn’t as simple as subtracting your purchase price from your sales prices as there are many other fees that are going to play a role in your total.
For many people the amount they get to keep is critical in the amount of a down payment that they have for their next mortgage. Here are some tips on estimating your net profit and what factors in.
Loan Fees – There is a chance that you will owe a pre-payment penalty to your mortgage lender for paying your loan off early. If there is a fee with your loan the typical fee is 6 months of interest. If you are unsure you can check your loan documents for the details.
Commissions – Any real estate agents involved in the sales transaction are going to make a commission off the sales price of your house. The commission usually ranges from 4% to 8% and is split between buyer’s agent and seller’s agent if it is a two agent transaction. As the seller, you are responsible for the total commission.
Cost of Repairs – If your written agreement includes repairs that you agreed to be responsible for at closing they will make sure these figures are deducted from your net profit. This is one reason handling repairs before listing is a wise idea. If you have already completed this repairs you will need to have this included in the agreement so you are not paying twice for the cost of the repairs.
Taxes – There are different types of taxes that will be subtracted from your profit depending on your specific tax situation. There could be property tax that you are still responsible for and depending on your net profit you could be responsible for paying tax on your capital gains as well. Seek advice from a tax professional.
Escrow fees – These fees vary from one transaction to the next and depend on if the closing is with an escrow agent or an attorney. These fees are typically split between the buyer and the seller, however that is not always the case because it can be negotiated in the offer made by the buyer. This can include any fees for courier service, wiring funds and other administrative costs that are incurred from the closing of your loan.
Buyer’s Credit – If this was something agreed upon when negotiating your deal do not forget to calculate this into your net profit estimate.
These areas are things to consider when estimating your total net profit on your home sale. You can also speak with your real estate agent about what they anticipate your bottom line to be. They are familiar with the closing process and all of the fees that are involved. Chances are that if they don’t know the answer they can help point you in the right direction.