If you're thinking about selling your home in the Spokane area and not sure how much it'll cost for you to do so, this article is a MUST read for you!
When most people think about selling a home, they think that the price they list it for, or close to that amount, is how much they will make on the sale, minus paying off their loan. So you want to read about all of the involved costs, so that you're aware. Also, when you plan to sell your home, your expert agent should be discussing this with you, so that you are prepared and know what to expect.
Cost #1: Commission
The costs of the commission take up the largest percentage of what you, as a seller, will pay when selling your home. I know different people have different opinions about what an agent "should" make and how much work an agent actually does, so if you're questioning this, you may want to take a good look at who you're working with. If they're not blowing you away with service and experience, it may not be the right person for you.
Generally, the commission is 6% of the total purchase price. How a listing agreement in the state of Washington reads is that you agree to pay your agent and their brokerage 6%, and then your agent/their brokerage agree to pay 3% to a cooperating buyer's agent and their brokerage.
This next point deviates a little bit from the article, and I want to bring it up. Although I've only ever had two people actually ask me to reduce my commission, I know there are many homeowners out there who think they're throwing money away when paying an agent to list their home. So I want to address that your agent isn't making all the money you think they're making... all agents have a commission split with their brokerage that is unique to them.
So let's say that your agent's split is 50/50 (for the ease of this example, and it's an actual split many brokerages have). Half of the commission made is paid to the brokerage and your agent pockets the other half. So on a $300,000 home, your agent has a gross profit of $4,500 and your agent's brokerage has a gross profit of $4,500.
In this example, I intentionally used the term "gross profit"... There are many costs that come out of the pot on the side of your agent, and sometimes with the brokerage. These costs include marketing your home (which is an absolute must always!), saving for taxes, saving for slow months, business costs, etc. If you ever have a question about where your agent puts the commission money, definitely ask! We share with each one of our sellers how much money we spend on marketing per month, and that money is marketing YOUR home. So there is nothing wrong with wanting to know some transparency, and you should feel comfortable with the money you're spending.
Cost #2: Real Estate Excise Tax
So, what the heck is real estate excise tax and how does it impact you? Excise tax, also sometimes referred to as REET, is a tax on the sale of real estate. In the state of Washingon, the levy rate is 1.28%. Most cities, towns, and municipalities also charge an additional levy, up to 0.50%. In most of the Spokane area, this additional 0.50% is levied. So for the purpose of this article, We are going to say that the excise tax is 1.78% total.
Now, if you're thinking about selling your home in 2020 or later, stay tuned for an article coming out in November. I'm going to go through how the excise tax levies are changing, and how, for most of you, it'll actually save you money (contrary to what many other agents have been preaching).
Back to this topic - the excise tax must be paid at closing, there is no way around it. It falls on the sellers to pay, but the buyer will be responsible for paying it if the seller doesn't. Now this doesn't mean you can force the buyer to pay it... where you see this happen is typically with a foreclosure. But in the case of a foreclosure, the excise tax is only $10 (they have very different rules that apply to them).
So to make it easy, if you're wanting to know the second cost, round up to 2%. It'll make it easier when you're calculating your costs.
Cost #3: Title and Escrow Fees
This cost is the smallest chunk of the costs associated with selling your home. There are several fees that make up this portion, and I'm going to go through each one briefly.
---Escrow fee: by default, the buyer and seller are each responsible for paying half of the escrow fee. This is charged on a sliding scale by price, and it's paid to the closer who manages and closes the property's sale.
---Homeowner's title policy: there are two types of title insurance policies on your home - one that protects the homeowner, and one that protects the lender (if the buyer is using a loan to purchase the home). You are responsible for paying the homeowner's policy, and the buyer pays the lender's title policy.
---Property taxes: this is if you haven't yet paid taxes for the current period you're in, and you'll be charged a prorated amount for the unpaid time when you've owned the property.
---Final utility holdback: this is money held back from your net proceeds (the money you make on the sale) to pay for your final utility bill for utilities tied to the property (not for things like gas and electric, unless those are tied in with your water bill).
---There may be other fees that are specific to your contract, or your property in particular, like an HOA transfer fee. Also, this list does not include any liens, loan payoffs, things like that that may be in addition and owed at closing.
So if you're thinking about selling, estimate that your cost to sell is 8.5% to 10% of the sales price. I always tell my clients to prepare for 10% and if it is less, than you pocket more money than you thought you'd make.
Thank you for checking out this article! Should you have any real estate related questions, reach out to me at 509-844-5843.