How much will I make from my home sale?
Any experienced agent can tell a seller that calculating their net sale proceeds isn’t as simple as subtracting their mortgage balance from the list price. Three other big expenses need to be calculated, including:
- real estate fees due the buyer’s and seller’s brokers;
- transfer taxes; and
- the seller’s expense to fix up the home for sale and prepare to move.
The biggest chunk of change is spent on broker fees. The average U.S. seller spends $13,500 on fees to their and their buyer’s brokers, according to Zillow. The typical fee rate is 6% of the selling price, though this rate can decrease in higher-priced markets.
The next biggest cost is preparing the home for sale. 79% of sellers undertake at least one home improvement project before they list their home for sale. Nationally, the average seller spends $6,600 to prepare their home to sell and move locally. Broken down, this total averages:
- $2,600 for exterior painting;
- $1,800 for staging;
- $1,200 for interior painting;
- $500 for a local move;
- $150 for landscaping;
- $150 for carpet cleaning; and
- $150 for house cleaning.
Lastly, the average U.S. seller spends about $750 on transfer taxes.
Here in California, average selling costs are much higher.
For example, the total average selling cost is:
- $83,800 in San Jose;
- $66,200 in San Francisco;
- $40,100 in Los Angeles;
- $42,400 in San Diego;
- $32,800 in Sacramento; and
- $28,700 in Riverside.
Out of these six major metros, the average selling cost comes to around:
- $42,200 in broker fees (compared to $13,500 nationally);
- $6,700 on preparing the home for sale and moving (compared to $6,600 nationally); and
- $780 on transfer taxes (compared to $750 nationally).
Thus, the number one reason — by far — for California’s high selling cost is high home values in metros across the state, which result in higher broker fee amounts.
Editor’s note — Zillow assumes a 6% broker fee for all home sellers. However, in many high-cost areas of California, this rate is typically lower.
Show them the money
Sellers aren’t usually comfortable asking their agent how much money they can expect to receive when the sale closes. But at the same time, the amount of money the seller will take away from the closing is typically their biggest concern.
Most sellers don’t know how to calculate the likely net proceeds their home sale will bring. Inexperienced sellers initially think the net sales proceeds will be roughly equal to their equity in the property — sale price minus their mortgage amount(s), less a broker fee. These sellers aren’t familiar with the many costs that impact their bottom line — until these costs are brought to their attention by their agent. And this notification is best made upfront, before these additional expenses become a surprise that has the potential to derail the sale after the agent has already expended significant effort to locate a buyer.
The agent, together with their seller client, may prepare a reasonable estimate of the likely net sales proceeds on any sale using a seller’s net sheet at the listing stage. This is prepared based on the asking price established by the seller with the advice of their agent. It may be adjusted when reviewing offers before acceptance or updating the figures to reflect any change in the list price. [See RPI Form 310]
True, preparing a seller’s net sheet is not required or even standard agent practice in California. But the time and effort expended to prepare a net sheet is a small premium to pay to assure the seller is capable of closing and receiving the proceeds amount needed to meet their financial goals and make their next home purchase.
