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Calculating the equity you have in your home is easy: You subtract what you owe on your home from what you think your home is worth. When it comes time to sell your home you’d think you’d do the same, subtracting what you owe on your mortgage from what you’ll sell your home for. Unfortunately, it’s not that simple.
Selling a home is a massive transaction with dozens of expenses associated with it — and (seemingly) dozens of documents. One of these documents, for the use and edification of sellers, is known as a net sheet. It contains an itemized breakdown of all of the closing costs and an estimate of the sum a seller will actually receive, or net, after the final purchase contract is signed.
Sellers may actually receive several net sheets throughout a real estate transaction. Here’s how they work.
What is a net sheet?
A net sheet — officially known as a seller’s net sheet — is similar to the closing statement sellers (and buyers) receive a few days before the home sale actually concludes. It’s an itemized tally of all the associated costs and expenses the current homeowner will incur as a result of the transaction, set against the sum the buyer is paying for the property.
However, while the information is largely the same, the closing statement is a legal document with the final, (hopefully) accurate figures. In contrast, the net sheet is an unofficial document, with estimated numbers. It functions as a kind of a work or balance sheet, giving sellers a sense of how much they stand to gain once the deal goes through.
When do you get a seller’s net sheet?
A seller’s net sheet is not required by law, but a good real estate agent should provide you with one multiple times throughout your transaction. Ideally, you’ll get your first net sheet while interviewing real estate agents and deciding who to hire as your seller’s agent.
A great real estate agent will send you an updated seller’s net sheet with every offer you receive so you can make an apples-to-apples comparison. Some buyers may want you to cover their closing costs, others may want something specific like a carpet replacement allowance, and some will just offer different prices. An updated net sheet will let you easily see what will gain you the most from each bid (see table).
You might also receive a net sheet right after you sign the purchase and sale agreement with the buyer.
Who prepares the seller’s net sheet?
While the title company or closing agent prepares the closing statements, a net sheet most commonly prepared by your Realtor, real estate agent or — in larger brokerages — one of their office staff, who will likely contact you asking for details like your current mortgage balance, HOA dues, and so on. Since the seller’s net sheet isn’t a standardized document, it can be prepared by anyone with access to the data needed. If you’re not working with a real estate agent you can prepare your own net sheet by gathering information and filling in the relevant fields.
What costs does a net sheet include?
Specific information included in a seller’s net sheet will vary based on your situation, but you can expect to have the sales price listed at the top, and then a series of expenses subtracting from it: your mortgage loan payoffs, closing costs, commissions and miscellaneous fees. Below is an example of a net sheet for a hypothetical home with two competing offers and buyers’ demands.
A sample net sheet
|Jones offer||Smith offer|
|PRICE FOR HOME||275,000.00||310,000.00|
|ESTIMATED SELLING COSTS|
|POLICY OF TITLE INSURANCE (based on home price)||1,375.00||1,550.00|
|TITLE AGENT FEES||250.00||250.00|
|TITLE DOCUMENT FEE||INC.||INC.|
|COUNTY RECORDING FEE||INC.||INC.|
|HOA TRANSFER FEES||0.00||0.00|
|REPAIR COSTS PAID BY SELLER||0.00||6,000.00|
|FLOOD CERTIFICATION (common in some localities)||N/A||N/A|
|BUYER’S CLOSING COSTS (that seller is assuming)||5,500.00||5,000.00|
|SELLER’S AGENT COMMISSION||8,250.00||9,300.00|
|BUYER’S AGENT COMMISSION||8,250.00||9,300.00|
|TOTAL SELLING COSTS||24,550.00||32,775.00|
|APPROXIMATE SELLER PROCEEDS||$43,450||$70,225|
How is a seller’s net sheet calculated?
The seller’s net sheet is calculated by taking the home sale price or an offer and then subtracting any encumbrances on the property (outstanding mortgage being the most common), closing costs and miscellaneous fees.
A net sheet created before any offers are received will usually include an estimate of what the real estate agent thinks your home will sell for along with the typical closing costs for that jurisdiction. Net sheets created after bids come in reflect agent commissions based on that selling price, plus any financially related contingencies related to those offers. As the example above shows, different buyers might ask the seller to shoulder different expenses, which can affect the amount a seller will net at the end of the day.
What are some common net sheet mistakes?
It is very easy to forget a step or an expense in a net sheet or to make an incorrect estimate. Forgetting to include property taxes, HOA dues, or title insurance premiums can all make a large difference in what you think you’re getting vs. the final number you’ll see on your closing statement.
Net sheet vs. closing statement
Net sheets and closing statements do contain a lot of the same data. The closing statement, most commonly referred to as the closing disclosure, is the official legal document showing exactly what you’ll receive as the seller after all closing costs and expenses are paid. It’s prepared by the title company or closing agent handling your home sale. In contrast, the net sheet is a more informal document, prepared by the seller’s real estate agent at any stage during the home sale.
The net sheet you might receive during the selling process is not going to be as accurate or complete as the official closing disclosure you’ll receive at signing. It functions more as a rough draft or a work sheet than a finished document of your expenses and overall profit.