When I Sell My House, How Much Do I Get?

When selling a home, the amount a seller ultimately receives is not simply the listed or agreed-upon sale price. This final figure, known as net proceeds, represents the money remaining after various expenses and financial obligations are deducted from the gross sale price. Understanding these components helps homeowners accurately estimate their payout from the sale. This process involves accounting for initial costs, existing debts, and potential tax implications.

Your Home’s Gross Sale Price

The journey to determining net proceeds begins with the gross sale price, which is the total amount a buyer agrees to pay for the property. Market conditions, the home’s specific features, and negotiation between the buyer and seller primarily influence this price.

Costs of Selling Your Home

A significant portion of the gross sale price is allocated to expenses incurred during the selling process. Real estate commissions are one of the largest costs, commonly ranging from 5% to 6% of the home’s gross sale price. This percentage is generally split between the buyer’s agent and the seller’s agent, covering their services in marketing the property and facilitating the transaction.

Beyond commissions, sellers pay a variety of closing costs. These can include escrow fees, which cover the impartial third-party handling of funds and documents, and owner’s title insurance, which protects the buyer from future claims against the property’s title. Transfer taxes, sometimes called deed taxes or stamp taxes, may be levied by local or state governments when property ownership changes hands, often ranging from 0.1% to 2% of the sale price.

Attorney fees, if legal representation is used, and recording fees charged by the local government to register the new deed are common seller expenses. These fees vary widely but typically range from a few hundred to a couple of thousand dollars. Sellers might incur pre-sale expenses for repairs identified during inspections or for professional staging services to enhance the home’s appeal.

Seller concessions, where the seller agrees to pay a portion of the buyer’s closing costs or provide other credits, reduce the net proceeds. These concessions are negotiated to facilitate the sale and can amount to 2% to 3% of the sale price. Property taxes and homeowners’ association (HOA) dues are prorated at closing. The seller is responsible for the portion of these costs covering the period they owned the home, with the balance credited to the buyer.

Paying Off Your Mortgage and Other Debts

A substantial deduction from the gross sale proceeds involves satisfying financial obligations tied to the property. The outstanding balance of the primary mortgage, including principal, accrued interest up to the closing date, and any prepayment penalty, is paid directly from the sale funds. Prepayment penalties are not common with most conventional mortgages but can exist with certain loan types, sometimes amounting to 1% or 2% of the outstanding balance.

Home equity loans or home equity lines of credit (HELOCs) secured by the property must be paid off at closing. These secondary loans function like a first mortgage in terms of payoff during a sale. The title company or closing attorney orchestrates these payoffs, ensuring debts are cleared before net proceeds are disbursed to the seller.

Beyond mortgages and equity loans, other liens may be attached to the property and must be satisfied. These include tax liens from unpaid property taxes, or mechanic’s liens placed by contractors who performed work but were not paid. Judgment liens, stemming from a court order, require settlement to ensure a clear title can be transferred. Clearing these liens is crucial for the legal transfer of ownership.

Understanding Capital Gains Tax

When selling a home, profit realized from the sale may be subject to capital gains tax. A capital gain is the difference between the selling price and its adjusted cost basis. The adjusted cost basis includes the original purchase price plus the cost of qualified improvements, such as additions or major renovations, and certain selling costs like real estate commissions.

The Internal Revenue Service (IRS) provides an exclusion under Section 121 for capital gains on the sale of a primary residence. For single filers, up to $250,000 of gain can be excluded from taxable income, while married couples filing jointly can exclude up to $500,000. To qualify for this exclusion, the homeowner must have owned and used the home as their main residence for at least two of the five years preceding the sale.

Gains exceeding these exclusion amounts are subject to long-term capital gains tax rates if the home was owned for more than one year. These rates range from 0% to 20%, depending on the seller’s taxable income. If the home was owned for one year or less, gain is considered a short-term capital gain and taxed at ordinary income tax rates. Some states may impose their own capital gains taxes, in addition to any federal tax liability.

Estimating Your Final Net Proceeds

To estimate the final amount a seller receives, begin with the gross sale price. From this figure, all costs associated with selling the home are subtracted. These selling costs encompass real estate commissions, seller-paid closing costs, pre-sale repair or staging expenses, and any seller concessions.

Following the deduction of selling costs, outstanding balances of all mortgages, home equity loans, and any other liens against the property are subtracted. This ensures all debts secured by the home are satisfied at closing. The resulting figure represents the amount the seller receives at closing before considering post-sale tax implications.

While not a direct deduction at closing for most sellers, the potential impact of capital gains tax should be considered. This involves calculating profit that exceeds federal exclusion limits, which will be a tax liability due after the sale. By accounting for the gross sale price, selling costs, debt payoffs, and potential tax obligations, homeowners can arrive at a more accurate estimate of their net proceeds.