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Thinking about selling your home and earning a tidy profit? Homeowners across the U.S. reaped an average $121,000 profit selling their homes in 2023, according to real estate data curator ATTOM Data.
You usually don't get to keep all the money you earn, however; you still have to pay real estate agents and cover other costs like closing fees and property taxes. Although costs vary by market, the cost to sell a house typically ranges from 10% to 15% of your home's value. Here are the costs of selling a house, plus how to save during the process.
Basic Costs of Selling a Home
As the saying goes, it takes money to make money. If your home's value has increased, you may stand to profit substantially when you sell. But you'll also have to pay some expenses to close the deal. For example, if the average cost to sell your $400,000 home falls in the 10% to 15% range, expect to pay between $40,000 and $60,000 in total costs.
Here's a breakdown of the most common expenses when you sell your house.
Agent Commissions: 5% to 6%
The real estate agent's commission to sell a home typically runs around 5% to 6% of the sales price. The seller usually pays the commission to their listing agent, who then splits it with the buyer's agent. The listing agent lists the home on the multiple listing service (MLS), arranges showings and negotiates offers.
For example, 6% commission on a $400,000 house is $24,000, which the listing agent and buyer's agent might split down the middle. That's a steep cost to sell your house, but it may be worth it. According to the National Association of Realtors (NAR), homeowners who use a real estate agent to sell their homes typically sell for $105,000 more than those who sell their homes without an agent.
Closing Costs: 1% to 3%
On top of real estate commissions, sellers must also pay closing costs, which could include transfer taxes, title search, escrow fees and any fees you agree to pay for the buyer. Closing costs for buyers can be between 3% and 6%, while sellers usually pay 1% to 3% of the sales price. However, closing costs often include items that are typically the buyer's responsibility, which sellers may agree to pay to sweeten the deal for buyers.
Your Mortgage Payoff: Varies
Unless you own your home outright, you'll need to pay off your mortgage with proceeds from the home sale. Remember, your lender holds a lien against your home until you zero out the mortgage balance.
You may also owe prorated interest as well as a prepayment penalty if your lender charges one. Lenders rarely charge prepayment penalties anymore, but you may have one if you have an older mortgage. Contact your mortgage lender to confirm your total payoff amount and avoid any surprises at closing.
Taxes: Varies
When you sell your home, you may need to pay various types of taxes, such as:
- Capital gains taxes: You may need to pay capital gains taxes if your home is worth more than when you bought it, but certain tax rules apply. So, if you bought your home for $300,000 and it is now worth $400,000, your capital gains are $100,000. You may qualify for a capital gains exclusion, in which case you don't have to pay capital gains tax on the first $250,000 of profit if you're a single tax filer and $500,000 if you're married filing jointly—as long as you're selling your primary residence.
- Property taxes: You must make sure your property taxes are paid up until the final closing date. Generally, you'll be responsible for covering taxes until the ownership transfers to the buyers, who will then take over paying the property taxes.
- Transfer taxes: Some local governments charge a fee when you transfer your property to a buyer. Transfer taxes are often negotiated between the buyer and seller to determine who will cover the cost.
Buyer's Title Insurance: Varies
Lenders often require buyers to purchase title insurance to cover the transfer of the title from the seller to the buyer. The insurance protects the buyer—and their lender—from potential ownership disputes, liens or other issues that could arise. During negotiations, you may agree to cover this expense for the buyers. Title insurance costs vary by state but usually cost about $1,000.
Moving Costs: Varies
Of course, you'll need to move your belongings to your new home. The cost of your move could depend on a multitude of factors, including whether you're moving across town or across the country. The size of your home is also important, as moving from a small apartment will cost less than moving from a large house. According to Moving.com, the cost to move roughly 7,500 pounds of items from a two- or three-bedroom home averages $1,250 for a local move and $4,890 for a long-distance move.
Additional Costs of Selling a Home
On top of these basic costs to sell a house, there are several additional expenses that you must consider.
Pre-Listing Home Inspection
Getting your home inspected before listing it for sale could help you confirm that all the major systems and features, such as the HVAC, electrical and roof, are working properly. Typically, this inspection costs between $300 and $425, which could be worth it if it helps you find and address any home repairs that might otherwise jeopardize a deal.
Home Repairs
When it comes to selling your home, some home repairs are more important than others. Generally, you want to make sure all essential aspects of your home are in good working order.
It's also wise to identify high-ROI repairs that can boost your home's value for a fraction of the cost. Improving your home's curb appeal, for instance, could add substantial value to your home without breaking the bank. A 2022 HomeLight survey reveals that buyers will pay 7% more on average for a house with exceptional curb appeal compared to another one with an uninviting appearance.
Home Staging and Preparation
Home staging is an optional expense you may want to consider. A professional home stager can arrange your furniture, decor and other features to make it more appealing to buyers. If your home is vacant, they can fill it with luxury furniture and, ideally, help buyers envision themselves living in the space.
Home staging costs vary, but NAR reports the average cost ranges from $300 to $600 for an initial consultation and $500 to $600 monthly for each staged room. That's a tidy sum, to be sure, but it could pay off if it helps your home sell more quickly.
Don't forget about your home's curb appeal, which you can improve quickly and inexpensively with minor improvements, like trimming bushes and trees and sprinkling flowers around the yard. Decluttering and deep cleaning your home's interior can create a clean space that buyers desire.
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Seller Concessions
In a buyer's market, you might offer to pay some of the buyer's closing costs. Offering such seller concessions can help get a deal across the finish line, since it reduces the upfront expenses for the buyers. You can also deduct seller concessions as sales expenses on your income taxes. Depending on the details of the deal, you may cover certain common seller concessions such as fees for the appraisal, inspection, title search or real estate taxes.
How to Save Money When Selling a House
Selling your home comes with some inherent expenses. However, you may be able to reduce costs and maximize your profit by following smart strategies, such as:
- Listing during seller's market: Trying to time the market may be a futile exercise since no one can predict with certainty what the housing market will do. Still, if you're in a seller's market and you're considering selling, listing your home now could offer some substantial benefits. Besides pricing your home for a higher amount, you may be able to leverage the home supply shortage to ask for reduced commissions and lower closing costs.
- Negotiating with a proven real estate agent: Since commissions and fees vary from one agent to another, it's a good idea to interview at least a few experienced agents to see which one offers the best balance of cost and experience.
- Negotiating a lower commission: While you're interviewing real estate professionals, don't be afraid to negotiate the sales commission, especially in a seller's market. If an agent believes your home will sell quickly, they may agree to a lower commission, which could save you thousands of dollars.
- Selling the home yourself: The largest cost of selling your home is typically the agent commissions, so you may be tempted to sell your home without one. Listing your home as for sale by owner (FSBO) or using a flat-fee MLS service are two ways you can DIY the sale of your home. FSBOs often take longer to sell, in part because agents will direct buyers to their own listings. If you choose to follow this route, make sure you market your home aggressively on popular real estate platforms online.
Frequently Asked Questions
If you sell your home without a real estate agent, you'll save on agent commissions that typically cost 5% or 6% of the final sales price. In other words, you'll save $5,000 or $6,000 for every $100,000 of the sales price. However, you'll still need to cover closing costs (1% to 3% of the sales price), property taxes up until the final closing date and other fees.
Several tax deductions allow you to save money on the sale of your home. Some of the most common deductions include:
- Seller costs: Costs related to selling your home are tax deductible but come with some conditions. To qualify for these deductions, the home must be your principal residence, and you must live in it for two of the five years leading up to the sale.
- Home repairs and renovations: If you make significant home repairs or home improvements, you may be able to add the cost to your home's tax basis, effectively lowering the taxable profit from the sale. The IRS considers many home improvements as tax deductible if they meet the agency's capital improvement criteria, which means improvements must:
- Add to your home's value
- Prolong its useful life
- Adapt the home to new uses
For example, adding a new roof, replacing the water heater and adding a new bedroom to your home are eligible for tax deductions. Be sure to consult with your tax accountant to check your eligibility, as tax codes may change.
- Capital gains: Capital gains are not a tax deduction; they're a tax exclusion. But, mitigating them could save you money. Capital gains are the amount of profit you make after selling your home, minus your sale-related expenses such as paying off your mortgage. The IRS considers this profit as taxable income. However, if you've lived in your home for at least two the previous five years, you may qualify for a capital gains exclusion—up to $250,000 if you're a single filer and $500,000 for married filers.
- Property taxes: You may be able to deduct up to $10,000 of the state and local property taxes you've paid—up until the final closing date—on your federal income taxes.
- Mortgage interest: You may qualify to deduct mortgage interest payments up to the first $750,000 of debt (or $375,000 if married and filing separately). If you took out your mortgage before December 16, 2017, you can deduct up to $1 million of debt, or $500,000 if married filing separately.
Interest paid on home equity loans and home equity lines of credit (HELOCs) may be tax deductible if the loan funds were used to buy, build or substantially improve your home. Consult your tax accountant to verify your eligibility for mortgage interest deductions.
The profit you earn from selling your house is the total income you receive minus your expenses. More specifically, your profit is your home's final sale price minus expenses, including closing costs, agent commissions, home improvements and paying off your remaining mortgage balance.
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In many instances, you may not owe federal income tax when you sell your home. For example, if you lived in the home for two of the last five years, profits below $250,000 for individuals and $500,000 for married couples filing jointly aren't taxed. Excess profits above those amounts may be taxed as long-term capital gains.
You may be subject to short-term capital gains tax if you've owned the property for less than a year. The amount you owe depends on your tax rate and filing status.
The Bottom Line
The most costly expense when selling your house is usually the agent commission, but don't be afraid to negotiate for a lower rate. If you work with a real estate agent to sell your home, choose one with extensive experience negotiating on behalf of sellers. You may be able to pay less for closing costs, seller concessions and other fees, especially in a seller's market.
If you're looking for a new mortgage for your next home, make sure your credit is in good shape by checking your credit report and credit score for free with Experian. If you spot any issues, take steps to resolve them to secure the most favorable rate and terms.