Achieving a Profitable Home Sale
Every home sale is motivated by unique reasons, but something that all of my seller clients have in common is the desire to make a profit on their sale. There are many factors that go into this, such as how much your home is worth vs. how much you still owe on your mortgage, but I’ve put together this little list to help give you a better idea of what to expect.
Check Your Mortgage Balance
This is the remaining balance on your original home loan, which you will need to pay off your mortgage in its entirety when your home is sold. Ideally your home will be worth more now than what you owe on your mortgage, but if that’s not the case there are options you can pursue. In addition to your original mortgage, if you have ever taken out a home equity loan on your property that will be due upon the sale of your home as well.
Prepare for the Market
If you decide you’re ready to sell after analyzing your current financial situation with your home, it’s time to get it ready for the market! In most cases I don’t recommend making major investments in your home right before a sale, but there are a few things worth investing in that will make your home more appealing to potential buyers and maximize its resale value. These items often include replacing carpet or hiring a professional carpet cleaning company, updating walls with neutral paint, and fixing exterior damage or planting some new shrubs to increase curb appeal. When done correctly, investing in the right updates to your property will come back to you when you sell your home for its maximum value.
Calculate Closing Costs
When you close the sale of your home and pay off your mortgage if you have one, ideally there will be a nice profit leftover for you to invest in your next property, put away for retirement or use however your heart desires! But, there are a few other expenses you have to take care of first, such as paying commission to your real estate agent.
Before your home ever goes on the market, you will sign a listing agreement with your realtor that includes the agreed-upon commission the agent will receive when the transaction closes. Technically this can be just about anything that suits you both and there is no legal requirement regarding the price of commission in Kansas or Missouri, but it is common practice to pay six percent of the sale price of your home - three percent to your listing agent, and three percent to the agent that represents the buyer of your property.
Another expense you’ll want to consider before you decide to sell is capital gains tax. Unless you’re making an insane profit on your home or you haven’t lived there very long you can often avoid this, but certain factors may require you to pay the government a chunk of change from your home sale profits. If you’re concerned this might be you or you have questions about how to avoid paying capital gains, let me know - I’m happy to help and I want you to keep as much of your hard-earned money as possible!
