When you decide to sell your home, calculating the net proceeds involves more than just subtracting your mortgage balance from the sale price. Several additional costs impact the final amount you will receive.
Here’s what you need to know about these costs and how they affect your net proceeds, specifically focusing on practices in the Lehigh Valley, Pennsylvania.
Key Costs to Consider
Mortgage Payoff
This is typically the largest expense deducted from your sale proceeds. Contact your mortgage company for a precise payoff amount.
Escrow Refund
If your lender handles property taxes and homeowner’s insurance through an escrow account, you might receive a refund of any surplus after paying off the loan.
Second Mortgages and Liens
Any additional mortgages, home equity loans, or other liens against your home must also be cleared at closing.
Real Estate Commissions
Real estate commissions can significantly impact your proceeds. While the total for both the buying and selling side is typically 5% to 6% of the selling price, these fees are negotiable and are not set by any professional organizations. The buyer may pay a portion of this, so speak with a real estate professional to learn more.
Much like fees for lawyers or accountants, the amount can be discussed, though agents have standard rates based on their services and market conditions.
The laws surrounding commissions are changing. If you are interested in learning more, click here.
Closing Costs
In Pennsylvania, sellers can expect a few specific closing costs:
Tax Prorations: You may receive a credit for taxes you’ve prepaid for the time you won’t own the home.
Transfer Taxes: In the Lehigh Valley, the 2% transfer tax levied by the State of Pennsylvania at the time of sale is typically divided equally between the buyer and seller, with each contributing 1%.
Miscellaneous Fees: These might include title preparation fees and home warranties, which vary depending on the specifics of the transaction and any agreements made during the sale process.
CALCULATING NET PROCEEDS
To determine your net proceeds, subtract the total costs from the sale price of your home.
Here’s a simplified formula:
Net Proceeds = Sale Price − Mortgage payoff - Liens − Commission − Closing Costs + Tax Prorations
Additional Considerations
Be prepared for possible expenses like home repairs or updates, which might arise during the inspection or negotiation phases.
Selling a home involves various complexities, and while this guide provides an overview, consulting with a local real estate professional can offer tailored advice and can help you navigate specific legal and financial details relevant to your area.