Most people look to comps in their area to come up with the listing price for their property. This is logical, but you also have to focus on the bottom line.
How Much Will You Make on The Sale of Your Property?
It happens more often than you might imagine. A homeowner decides to sell and goes about figuring the best price to sell. They may set a price off of the cuff or do research to ascertain the best price that will result in a sale within a specific time period. What many do not take into account, however, is the ultimate amount the will get from the property. This can lead to brutal surprises when the ultimate amount is much less than expected – a concept known as seller’s remorse.
In reality, the decision to sell your property should only be made after determining what you can objectively get out of it. Most people, however, tend to eyeball this amount. If you have a lot of equity in the property, it really is not an issue. If you don’t, you better start calculating or you could be in for a bad shock.
The first place to start is the estimated price you will sell for minus the outstanding balance on your mortgage. This gives you a rough estimate of your equity, but should not be relied upon as the final cash out figure. Instead, you have to sit down and start calculating the other costs such as:
1. Mortgage pre-payment penalties,
2. Property taxes for the portion of the relevant year in which you are selling.
3. Any costs associated with repairs to the property to get it in shape to sell.
4. Attorney’s fees if a lawyer is required to be part of the process in your state.
5. Incidental costs associated with the sale as agreed to in the purchase agreement with the buyer. Items can include title insurance premiums, recording fees, inspection fees, warranty insurance, escrow fees and so on.
One area people completely forget to factor in is, the commission paid to the agent(s) for selling your home. A typical 6 percent commission on the sale of a $300,000 home is $18,000. Note, that this (like other items) is a negotiable item. Regardless, you need to ascertain how you will sell the home and the relevant cost of doing so as part of your overall calculation.
Making the decision to sell is an emotional one. It should, however, also include a hard, cold look at the financials involved and whether doing so makes sense.