If I Sell My House for $400k, How Much Do I Get?

When you sell your home, the gross sale price is not the amount of cash you ultimately receive. Various financial deductions and obligations reduce this figure to determine your net proceeds. This article details the costs that typically reduce the amount you receive at closing after a $400,000 home sale.

Real Estate Agent Commissions

Real estate agent commissions are a significant deduction from your home’s sale price. These commissions are typically a percentage of the final sale price, commonly ranging from 5% to 6% nationally. This percentage is usually split between the seller’s agent (listing agent) and the buyer’s agent (selling or cooperating agent).

For a home selling at $400,000, a 5.5% commission rate amounts to $22,000. This fee covers the agents’ services, including marketing, negotiating offers, and managing the transaction. The commission is typically paid from the sale proceeds at closing.

Commission rates are generally negotiable but are a standard cost of selling a home through traditional real estate channels. Sellers usually pay the entire commission, which is then divided between the two agencies. This structure compensates both agents for facilitating the sale.

Mortgage Payoff and Other Debts

The outstanding balance on any existing mortgage must be paid from the sale proceeds. Your mortgage lender provides a payoff statement, including the remaining principal, accrued interest up to the closing date, and any prepayment penalties. This statement ensures the exact amount to satisfy the loan is transferred directly to the lender at closing.

Beyond the primary mortgage, other debts or liens tied to the property also require satisfaction from the sale proceeds. These can include home equity lines of credit (HELOCs), second mortgages, mechanic’s liens for unpaid work, or judgment liens. All must be cleared.

Clearing these encumbrances is necessary to transfer clear title to the new owner, ensuring they receive the property free of financial claims. The title company or closing attorney manages the distribution of funds to these creditors based on official payoff statements. The amount needed to cover these debts can reduce the net proceeds a seller receives.

Seller-Paid Closing Costs

Seller-paid closing costs include various fees and expenses incurred during the property transfer process, distinct from agent commissions and mortgage payoffs. These costs vary depending on the location and specific terms of the sale agreement. They represent a collection of smaller financial obligations.

One common cost is the seller’s policy for title insurance, protecting the buyer and lender from future claims against the property’s title. Escrow or attorney fees are also customary, compensating the professional who facilitates closing and ensures documents are executed and funds disbursed. Many jurisdictions impose transfer taxes or recording fees when property changes hands. These are sometimes split between buyer and seller or borne entirely by the seller.

Prorated property taxes and homeowners association (HOA) dues are adjusted at closing, with the seller responsible for their share up to the closing date. If the seller offers concessions to the buyer, such as credits for repairs, closing costs, or a home warranty plan, these amounts are also deducted from the seller’s proceeds. These concessions are often negotiated to make the deal more appealing. All these costs are itemized on the closing disclosure statement.

Tax Implications of Your Sale

Selling a home can have tax implications, primarily related to capital gains on any profit realized. Capital gains are calculated as the difference between the sale price and your adjusted cost basis, which includes the original purchase price plus the cost of significant home improvements. For instance, if you bought your home for $250,000 and spent $25,000 on renovations, your cost basis would be $275,000.

A significant tax benefit for many homeowners is the primary residence capital gains exclusion, as outlined in IRS Section 121. This exclusion allows single filers to exclude up to $250,000 of capital gain from taxable income, or up to $500,000 if filing jointly. To qualify, you must have owned and used the home as your main residence for at least two of the five years prior to the sale date.

If your capital gain exceeds these exclusion limits, the excess may be subject to capital gains tax rates. These rates vary based on your income level and how long you owned the property. Short-term capital gains (properties owned one year or less) are taxed at ordinary income rates. Long-term capital gains (properties owned more than one year) typically receive more favorable rates. Consulting a tax professional is advisable to understand your specific tax liability and ensure compliance.