Complete Guide with Seller Net Proceeds Calculator, Paperwork and Checklist
Were you shocked to discover how much of your net proceeds from the sale of your home will go to real estate commissions? You are not alone. With the recent price increases, selling a house priced at $350,000 with a 6% real estate commission will cost you $21,000. Ouch!
Is there a better way? Can you save most or part of this money?
The answer is yes and this guide will help you sell your property like a pro without the high cost of a real estate agent.
How Much Your Will Net?
We created a handy Seller Net Proceeds calculator to estimate how much you will net from your sale. This calculator will give you an approximate estimation of your net proceeds, your taxes, and when you will sell your property and your county may change this calculation.
These will be your main closing costs:
- Owner’s Title Insurance – In Florida it’s customary for the seller to pay for the Owner’s Title Insurance and to choose the title company.
- Documentary Stamp on Deed – This is a tax on the transfer of an interest in real estate property. It’s paid by the seller and is $0.70 per $100. This could be slightly different in each county by not by much.
- Title Charges – In Florida, most closings are done by Title Companies. The average change for their services is $450.
- Taxes – Real estate taxes in Florida are paid in November, the same year. For example, your will receive your tax bill for 2022 in November 2022. If you sell your property in December 2022 and you already paid the real estate taxes, you will get a credit for the months you already paid. If you haven’t paid your taxes, the buyer will get credit.
- HOA – It depends when you pay your Home Owner Association dues, you may get credit or the buyer may get credit.
- Repairs – This is negotiated credit to the buyer. If your home is in perfect condition, you may not have to pay anything.
- Seller Concessions – This may include contributing towards the buyer’s closing costs and prepaid expenses. Right now I don’t expect many buyers to be asking for closing costs but when the market is more balanced, it happens more often.
Pros and Cons of Selling Without an Agent
The biggest pro of selling by owner is savings. Some sellers simply don’t have a choice but to sell directly. Even if you have a choice, the thought of giving away so much of your equity is painful.
Another pro is controlling the whole process: from preparing the home for sale to negotiating. There are some excellent agents out there who wouldn’t pressure the seller so that they can get a quick commission but unfortunately there are agents who will not negotiate in good faith. Controlling the sale allows you to get the most money for your house if you know what you are doing.
The biggest con is the lack of objectivity. I have seen plenty of sellers who think their house is perfect and they wouldn’t do anything to fix it. Sometimes their personal taste conflicts with most buyers’ tastes.
Being objective and calm is paramount when you are negotiating with buyers. Unfortunately, most sellers have a personal attachment to their property which sometimes doesn’t allow them to see things clearly.
Preparing the House for Sale
Do you have to prepare your house for sale? The answer is not always. Calculate what it will cost you to spruce up your house. In certain cases, it may be worth offering a lower price and AS-IS condition and attracting competition rather than fixing everything. It’s simple math.
However, don’t think that you can sell your property at full price or above unless you fix it in a way that attracts current buyers.
Where should you start?
Start with the exterior. Ask a neighbor or a friend about what they think can be improved. The more people you talk to the better. Every one of us thinks that we have the best taste for decorating. Well, maybe there is a minority who accurately appraise their decorating abilities but the majority of us think that we are decorating geniuses.
Always start with thorough cleaning: pressure washing everything outside, washing windows, cleaning gutters.
Here is an article I wrote on how to improve the curb appeal of a property.
I am amazed how many flippers fix everything inside and leave the landscape looking like a desert.
Start with cutting the overgrown bushes and trimmed branches, especially ones hanging over the house. Be careful to leave enough green. It’s a balancing act.
Next, mow and edge the lawn. If your lawn has bald spots consider using plugs. Feed and weed the lawn, and consider watering it regularly.
Add color to the flower beds with annual flowers and add mulch.
Start with painting. If you’ve lived in your house for more than two years, your house needs painting or at least touch-ups. While you are at it, paint the baseboards and doors with white semigloss paint, unless your baseboards are a different color.
Objectively look at your kitchen. Are the cabinets falling apart or peeling? As we live in our houses we start to accept those imperfections, however, buyers will look at your house with fresh eyes. Instead of fixing these things fairly cheaply, you may have to contribute thousands in repairs.
Two things you should pay attention to in the kitchen, are the kitchen sink and the faucet.
Finally, clean the house. A good professional cleaner will know how to make things sparkle and look brand new.
Pricing the House Correctly
Nowadays there are many websites that will help you price your home correctly. If your property is located in a community with fairly similar homes then those websites will probably give you an accurate estimate.
If however your property is located in a more urban area, those tools may be way off.
How do you decide what your home is worth?
First look for comparable homes in your community. Usually, you should look at all homes that sold within six months but today’s prices are jumping up so fast that I wouldn’t look at any comps that are older than 90 days.
If your home is located in an urban area look for comparable properties within half a mile, suburban within 1 mile, and rural within 5 miles.
Always compare apples to apples:
- Homes should be similar in architecture
- Heated square footage should be + or – 250 sq. ft.
- The same bedrooms and baths
- Five years older or newer.
Listing the Property
First, I want to explain how MLS and agents work so you get a better understanding of what’s possible for you.
In the US, the listing agent represents the seller, and the buyer or sometimes called the seller’s agent represents the buyer. Most listing agreements are exclusive, meaning that even if the sellers find a buyer, they will still have to pay commission to the listing agent.
The listing agreement also specifies how much the listing agent will pay to another agent who brings them a buyer. This is usually from 2.5% to 3%.
The listing agent lists the property in the Multiple Listing Service -MLS. Websites like Zillow, Realtor.com, and Trulia pull the listings from the MLS and offer them on their websites. Sometimes this happens immediately sometimes it takes up to 24 hours.
It’s important to point out that the MLS requires that some compensation be listed for the buyer’s agent. This can be as low as $1, however, not many agents will show your property for $1 compensation.
There are some commercials on TV that offer only 2% commission. These companies are offering a listing commission of 2%. This means that if they find a buyer you will pay 2% if they directly sell the house but if another agent brings the buyer, you could pay up to 5%.
If this still looks like a good deal to you, keep in mind that only 25% of all buyers are brought by the listing agent.
What Are Your Options?
- Sell directly to iBuyers like OpenDoor, OfferPad, Redfin, etc.
- List in the MLS and pay buyer’s agent commission of 2.5% to 3%
- List with Redfin 3.5% total commission
- List directly in Zillow and the other websites where allowed without paying commission.
Sell to an iBuyer
The most prominent iBuyers are OfferPad, OpenDoor, and Redfin.
What I see on the ground is that OfferPad and OpenDoor are making close to full-price offers. OfferPad charges 4% plus 1% closing fees, which is almost equal to full real estate commission. The real draw is that you don’t have to show the house and you get an instant offer.
I’ve heard from sellers that some of the iBuyers try to ask for repair contributions after you are in a contract with them and they can waste your time because you can’t accept another offer.
Some sellers are pretty happy with OpenDoor. I know a flipper that sells all his rehabbed properties to them at almost retail prices.
If you decide to go with any of the iBuyers, read your contract very carefully before signing it.
Read the reviews about OfferPad and OpenDoor, especially the negative ones and be prepared.
Offers and Negotiating
If you receive an offer through the MLS, most likely the buyer’s agent would submit the offer to you and you have three options:
- Accept the offer
- Counter the offer
- Reject the offer
Have you heard the saying ‘don’t look a gift horse in the mouth’?
If you receive an offer that’s great take it, don’t be greedy. I see this very often. The first offer the seller gets is exactly what he wants but the seller decides to wait and see what else is there.
If you have more than one offer by all means counteroffer and ask the buyers for their “best and highest offer.” This usually happens when the seller intentionally prices the property below market price hoping to get multiple offers. This tactic often works very well.
Counter the offer if it’s close to what you want to get. The best way to counter is to offer information on why you think the buyer should pay more or why you should pay for repairs. Whatever it is, make sure your counteroffer is supported by facts.
It is fine to counteroffer verbally and after everything is negotiated the offer is amended and the contract is signed with the changes.
I never reject offers because I know that some buyers are under the wrong impression that they should start low. Many sellers get offended by low offers, however, a verbal counteroffer is definitely worth it. Take it or leave it is not a good negotiating tactic.
What do you need to know in order to accept an offer?
- Is the buyer pre-qualified and how solid is the company offering the prequalification. Find a mortgage broker that can prequalify any of your buyers who come unprepared. This is what an agent would normally do but now it’s your responsibility.
- What is the buyer financing-how much money they are putting down? This is important because a buyer with a large downpayment has more wiggle room when it comes to being approved.
- Closing date
- When would the home inspection and termite inspection contingencies be removed, the sooner the better.
After the Contract is Signed
After the contract is signed, many things need to be done before the closing date. Almost every contact has some kind of contingency, think of a contingency as a condition that needs to be satisfied before the closing takes place.
Some standard contingencies are:
- Home Inspection
- Sale of the home of the buyer
Contingencies either have to be removed in writing in order for the closing to occur or they are self-executing (they contain language that removes the contingency automatically.)
What is the seller’s responsibility after the contract is signed?
- Pick a title company and deliver the contact and the contact information for the buyers and the buyers’ agent if any.
- Follow up with the title company to make sure the buyers deposit the earnest money on time.
- Follow up with the buyer’s mortgage company to check on the status of the financing.
- Talk to the title company to make sure everything is moving along smoothly. Title companies can usually tell when the buyer is having issues with the financing. For example, lenders don’t offer surveys until they are pretty sure the loan is good.
- If the buyer requires repairs after the inspection, the seller has to complete the repairs before the closing day walkthrough.
The buyers have to make sure the inspection is done on time and that they can obtain home insurance plus anything else required by the lender.
A final walkthrough needs to be done before the closing to make sure all repairs are completed and the seller has moved out.
The title company takes care of everything on settlement day and issues the checks.
That’s all folks! Happy selling! Let me know if you have any questions.