Last week’s the article titled “Can I afford to sell my home? Part I” discussed the emotional side of selling your home. Part II covers the FINANCIAL aspects in selling a home. Studies suggest that homeowners need between 10-15% equity. This percentage includes five main financial categories to consider when selling a home.
The first category is equity. Equity is the difference between what you owe on the home and what the home is worth. To learn the value of your home, I suggest you contact a local Realtor. Once the home’s value is determined you will know whether or not the time is right to sell.
While there is no set commission rate for Realtors, a common commission is 6% of the purchase price. A good Realtor must effectively guide you through the process of selling your property. This includes but is not limited to marketing your home, showing the home, providing contractor recommendations, and employing specific knowledge of local and state real estate laws to complete all required paperwork.
The third expense when selling a home are closing costs. These can average between 1-3% of the purchase price. The title/escrow company levies these fees for managing the financial and legal aspect of the transaction.
The fourth, and often overlooked, cost in selling a home are the repairs. While it is not necessary for the seller to make every single repair the buyer requests, there may be certain repairs that need to be made. Required repairs are based on state law and the type of loan the buyer is receiving. If you have enough equity in the home, the repairs can be made during escrow and paid out with the proceeds from the sale of the home.
The fifth and final aspect of selling a home is the price reduction. Always keep in mind you might need to lower the price of your home due to market conditions.
When selling a home, you need to focus on the following: the home loan, Realtor’s commission, closing costs and repairs. Combine these with a possible price reduction, selling a home is expensive. Bottom line: find out what the home is worth then deduct 10-15% from that price. If you are comfortable with this figure great, proceed.
John Jennings, III
John Jennings, III is a licensed Realtor® who works for Mid State Realty in Coalinga, CA. For more articles like this one go to johnjenningsrealtor.com. John can be reached at firstname.lastname@example.org and (559) 970-4312.