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The Real Estate Adviser

Keeping a lid on home-sale expenses

Dear Steve:
What are the main expenses incurred when selling a house?
Norma

Dear Norma:
There's a litany of them, although some of the major ones, such as remodeling and agent fees, are optional -- to a degree.

Here are the most common costs and a few tips on containing them.

Improvements, remodeling: Remodeling expenses that are most likely to add value to your home include new central air/heating and a new deck. Wet bars, swimming pools or garage conversions may return less because they are specialty additions. You could spring for new cabinets, built-in appliances, wallpaper or flooring, but some buyers will not share your tastes and may want to make those color/style choices themselves. However, anything that's in ill repair, such as a rickety fence, should be tended to or you'll lose negotiating points.

Curb-appeal items that aren't particularly expensive include fresh paint, new shutters, and new flowers and plants. They can give your exterior added luster for "show time." Inside, invest in some washers to fix leaky faucets, pony up for some scented potpourri, bake a cake in the kitchen for that homey fragrance the day your house is being shown. These are all cheap but effective ways of establishing a positive buying mood.

Many home-improvement expenses, by the way, are tax-deductible if you have to report a capital gain. Keep thorough records for your tax preparer.

Agent fees: A huge chunk of change here. Sales commissions, mind you, may vary depending on sale price, location and the vibrancy of the market, plus they are negotiable. If you don't travel the agent route, know you'll be responsible for the listing, advertising, signage, showing, negotiation, etc. What's your time worth?

Inspection: Although buyers will generally pay for their own inspection, it's probably prudent to get one done yourself to get an accurate look at your fix-up costs. Unpleasant surprises such as mold or foundation problems are best discovered -- and rectified -- early.

Legal expenses: Even if you're not going the for-sale-by-owner route, you still may want an attorney to examine the sales contract and assist with closing, which can be complicated.

Closing costs: Most are the responsibility of the buyer, although you'll be expected to pay the property taxes and insurance up to the date of the closing, even if they're not due yet. You're also likely to incur some expense in guaranteeing clear title and state fees on the deed. Also, some buyers will ask the seller for help with other closing costs as part of the negotiations, especially in higher-cost homes.

Prepayment penalty: You may be assessed prepayment penalties if you pay off the mortgage early. Examine your mortgage agreement.

Moving costs: Though not directly associated with selling, you're obviously moving somewhere, and you'll probably need a truck and movers, unless friends or family members are up to the task. At the very least, you'll need to invest in packing supplies, and ideally, an ad for a garage sale, so you won't have to haul all that stuff with you.

Good luck!

-- Posted: June 5, 2004

 
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