Selling a Home Costs Money Too
Several entities that wonder about such things have commented recently on the apparent reluctance of homeowners to sell their homes. Historically Americans have tended to buy their first home at a certain age, and move up into a newer, larger, better located, or more amenity laden home a few years later, and then perhaps move again to downsize or relocate to a more suitable place for retirement. Now, not only are they buying that first home later than their predecessors, but once settled in, they tend to stay there. This has had ramifications for potential buyers as inventories of existing homes for sale are at record lows.
This lack of mobility was initially blamed on the lack of home equity following the housing crisis. This locked homebuyers into place, either because the sale price failed to cover their mortgage balance or might not provide enough cash for a down payment on the next home. Then the possible reasons were variously the tight purchase mortgage requirements that made it scary to sell a home they already owned, unwillingness to lose a current super-low interest rate, or the circular argument, too few available homes to buy. Now Thumbtack Journal adds another reason; the cost to sell a home. The Journal says, "selling a home isn't just about making money, it's about spending some too."
The publication's analysis, based on data from Zillow, puts a price of $15,190 on the extra or hidden costs involved in selling a home, and speculates that "a big part" of the record $327 billion homeowners will spend on renovations and repairs this year is in getting that home ready for sale. Since 63 percent of today's sellers have never sold before, some of these costs could come as a big surprise.
Eight of 10 sellers make improvements on their home before putting it on the market and those who hire professionals to do the work pay an average of over $2,650 for staging, painting, landscaping, and cleaning - some of the most popular pre-listing projects. The costs can vary by region but a rough range would be an average of $4,000 in Los Angeles verses $1,500 in Columbus, Ohio.
Outdistancing the fix-up costs, which are at least optional, are marketing and closing costs. Real estate commissions and the sales or transfer taxes that are levied in most states, cost an average of $12,532 when selling a median priced home. Since both commissions and taxes are based on the sale price there is again a wide variation on these costs. The median cost in San Francisco, the most expensive market Zillow looked at, was over $55,000 while in Indianapolis, which has much lower home values and no transfer tax, it is $8,238. Other costs in the middle ranges were $40,800 in Los Angeles, just under $30,000 in both Boston and Washington, DC, and $23,300 in Portland, Oregon.
While it can be argued that real estate commissions are also optional, there is also a cost to owners who chose the for-sale by owner or FSBO route - newspaper ads, printing costs, and a widespread assumption on the part of buyers that they should share in the seller's commission savings.