Ready to Sell? Punch the Numbers to Avoid Surprises

Imagine this: You have owned the house for years and accumulated lots of equity. Now you’re ready to sell, but are surprised to find out later the gain is not as much as what you have originally thought.

The fact is, the cost of selling a home is high. It’s more so in Los Altos and Los Altos Hills where bigger homes mean more preparation work needs to be done, and the average home prices are among the highest in the Bay Area.

To avoid surprises, do the math ahead of time. It's not uncommon to spend more than $100,000 to prepare some homes.

An estimated net sheet is one of the first things I usually provide to homeowners who are considering selling. It is especially important for those who plan to use the proceeds to buy another home. If you’re considering selling, here is how you estimate your selling costs.

Getting Your Home Ready

To showcase the best of your home, you need to take the time to get the house ready. The following are some of the typical costs involved.

Do the inspections: Besides the basic to-dos like cleaning and decluttering, getting the home and termite inspections done, upfront, have pretty much become the standard here. It’s a good idea to bring in a swimming pool inspector, too, if the home has a pool. The home inspector may suggest additional inspections, such as those for the roof or chimney subject to what he or she finds. Inspection costs range from a couple-to-a-few hundred dollars each.

Make repairs: Additionally, it is a good practice to complete all the necessary repairs prior to putting the house on the market.  The home will be more desirable when it is clean and “problem-free.” The total repair costs obviously depend on how well your home has been maintained.

Consider staging: Staging is another major expense. This involves bringing in a professional who will edit your furniture or bring in temporary pieces, possibly paint walls and accessorize the home to appeal to buyers. While optional, most homes in Los Altos and Los Altos Hills are staged. Staging is not inexpensive, but it is worth every penny for its ability to bring buyers to the table. This costs $2,000 and up, depending on the size of the house and the scope of services. One way to save on costs, especially for a larger home, is to stage partially. People usually choose the living area and a few bedrooms.

Professional Selling-Related Services

The single largest selling expense is the commission paid to your real estate agent. Though 6 percent is considered the market rate, it is completely negotiable. But if your agent is charging you substantially less, make sure that he or she will do everything you expect to be done and will offer enough compensation to the buyer’s agent to maintain the competitiveness of your home.

In Santa Clara County, it is customary for sellers to pay for the owner’s title insurance and escrow fees. Title insurance protects an owner’s interest in real property against loss due to title defects, liens or other matters (with restrictions applied). Additionally, home sellers pay for escrow that handles the funds and documents of the transaction.

There may be some slight variations in costs from one title company to another but their charges and services are pretty standard. If you don’t have a preference, your agent normally would recommend a reputable one with whom he or she works often.

There are also some government-mandated fees that are normally paid by sellers, including the county transfer tax. Additionally, while this does not apply to Los Alto and Los Altos Hills, some cities do impose a city transfer tax that is usually split between the buyers and sellers. Check with your real estate agent if you are selling in another city.

Additional expenses may come up, depending on your specific situation. They may include home warranty, homeowners’ association-related fees if your home is in a condo or other shared complex; and the maintenance and mortgage costs during the marketing and escrow periods.

The table below summarizes the costs of selling a home at the sample prices of $1.7 million and $2.1 million. Keep in mind that this is just an estimate, and the actual costs vary depending on the vendors you choose, the condition and size of your home, and other factors.

$1,700,000

$2,100,000

Items

Cost estimates

Cost Estimates

Title Insurance*

$3243

$3678

Escrow fee*

$1850

$1850

County transfer taxes*

$1870

$2310

Misc. fees (recording/notary)*

$80

$80

Agent commission at 5%

$85,000

$105,000

Inspections

$800+

$800+

Repairs

Varies

Varies

Staging

$3000+

$3000+

Home warranty

$500

$500

Total

$96343+

$117218+

*Fee estimates provided by

As you can see, it’s not uncommon to spend more than $100,000 to sell a home in Los Altos or Los Altos Hills, depending on the size and value of the house. If you don’t want to be caught by surprise, do your homework and punch the numbers ahead of time. And as always, talk to your real estate agent if you need more professional advice.

Winnie Yip Fong, a Los Altos resident and a local Realtor, writes a monthly column to provide advice and her insights into the local real estate market. E-mail her to winniefong.realestate@gmail.com for any suggestions or comments.