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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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