When it comes to selling a home in and around the Arlington Virginia area, especially right now, it can be a quick and exciting process. With the market leaning so heavily toward sellers, we are seeing buyers offer thousands of dollars over the asking price to be competitive within the market. This isn’t always the case, though. The real estate market swings back and forth between being a buyers or sellers market, and it’s good to be prepared for both whenever you’re thinking about selling your home.
There’s a lot that goes into selling your home - getting updates finished, finding the right realtor, and making sure the property looks at its best for showings and open houses. In the midst of all the excitement and preparation, it’s easy to forget the financials and what it really costs to sell a home.
I work to make the process of selling a home as easy as possible - so I want my clients to have proper expectations when it comes to the costs of selling their home. To help you out, here is my list of five costs you should know about when you think about selling your home!
Renovation and Update Costs (Between $500 - $20K)
Whether you have been in your home for two years or twenty, doing some renovations and making some upgrades can go a long way when it comes to listing your home for sale on the market. Curb appeal and first impressions are huge and can either make it or break it with potential buyers.
So, what renovations are best? Here are a three options that can get you a good return on your investment and increase the appeal of the aesthetic of your home:
Minor Bathroom Remodel. Bathrooms, especially for families, can be a space of peace and comfort for most people. It’s a small room to start making improvements and the investment can go a long way when it comes to adding value to your home. Average return: 102%.
Landscaping. It’s no joke that most buyers have already made a decision about a house when they see the outside (whether it’s in person or online) for the first time. Whether you want to DIY-it or hire someone to come and spruce up the front (or backyard) of your home, it’s one of the best investments you can make before selling. Average return: 100%.
Minor Kitchen Remodel. This one should be high on your list for obvious reasons. The kitchen serves as a focal point of your home - it can either make or break a sale depending on the buyer! A lot goes into how much a remodel costs based on your timeline and budget, but the average price of a minor kitchen remodel sits somewhere around $25,000. Average return: 98.5%.
It all depends on what you’re wanting to put into the home before selling. If renovations and updates are on your list, be sure to include that in your costs!
The Home Inspection ($600)
Getting your home inspected can be beneficial for both buyers and sellers. Why? Because it gives you a realistic look at where your home stands as far as an in-depth inspection goes. As a buyer, getting an inspection done can really help prevent any major surprises during the process of showing the home and buyers making offers. The last thing you want to happen when a buyer makes an offer is to receive a bad inspection that is going to require a lot of repairs. It only holds up the process and costs you extra money to get repairs done in a rush.
An inspection also looks really good to potential buyers. By giving them a recent inspection, you are basically making your home an “open book” - and buyers are going to really like that.
Capital Gains Tax
Just like most things in life… making money ain’t free. The government still takes their share, and that’s just how it goes. If you are selling your home for more than you paid for it, you are most likely going to owe some capital gains tax. How much? Here is a really simple breakdown.
0% Bracket: If your yearly income is below $40,000, then you will pay 0% tax on the profit of your home sale in 2020.
15% Bracket: If your yearly income is between $40,001 and $441,450, then you will pay a 15% tax on any eligible home sale profits in 2020.
20% Bracket: If your yearly income is $441,451 or higher, then you will pay a 20% tax on the taxable proceeds from your 2020 home sale.
This will probably be your biggest cost when it comes to selling your home. When you use a real estate agent to help you officially list, market, advertise, and conduct the transaction of selling your home, they will take a cut of the profit (this is called their commission). These commissions operate as a percentage of how much you sell your home for. This percentage can fluctuate, but you can estimate that your agent’s commission will be somewhere between 3%-6%. Let’s run some numbers:
If you are selling your home for $500,000 and looking at a 3% commission for your realtor, you can expect to pay around $15,000 for the commission. Here’s the good news: you don’t have to bring that money to closing. Your agent will most likely just subtract their commission from the total profits of the sale!
Closing costs will probably end up being your second-biggest expense when it comes to selling your home. Closing costs will average somewhere between 2%-4% of the total sale price of the home. There are a lot of technicalities that go into closing costs, but it’s good to know that they cover escrow and title expenses, HOA fees, and prorated property taxes (and more). Here’s the good news: you are not guaranteed to have to pay closing costs!
It’s not unusual for closing costs to be used as a bargaining tool for buyers wanting to “up the value” on their offer. Especially in a seller’s market, it could be pretty common for the buyers to offer covering the closing costs.
So, there you go! Selling your home is a big deal and it’s wise to know financially where you’ll stand before and after the transaction goes through. Don’t let expenses surprise and use this guide to estimate how much it might cost for you to sell your home!
For more information on why Arlington is a great place to buy and sell, please feel free to contact me at Winkelmann Properties. Also, follow me on Facebook for tips and news. I am here and always happy to help you find sell your home in Arlington.