Here's what percentage of your budget needs to go where.

5 minute read

For the vast majority of Americans, their home is the largest and most lucrative investment they own, and selling it will bring in an unprecedented windfall. But it’s easy to forget, in the excitement of selling your home, that it costs money to make money. In fact, experts estimate that selling a house will cost you approximately 10% of the final sale price.

So for a house that sells for $200,000, the average seller will have to shell out $20,000 in transaction costs. That’s a big chunk of change and, when the final accounting is done, many sellers end up paying even more than 10%.

Where does all that money go?

It’s complicated, because selling costs aren’t just one, discrete charge; they’re a bundle of many smaller charges, some of which are optional, but most of which are unavoidable.

Still, there are ways to reduce these costs and, in some cases, eliminate them entirely. Let’s break down the costs of selling, and see where a creative seller might have some wiggle room to save.

Repairs and Improvements (1-3%)

Just like you’d wear your nicest clothes to a job interview, a seller needs to make sure their house looks its best before letting buyers see it. That means making small repairs that you may have been putting off, like broken light switches, squeaky doors, cracked drywall, or making cosmetic improvements like updated light fixtures, wall and window treatments, and refinishing floors.

Experts agree that the most cost-effective pre-sale home improvement is painting; a fresh coat of paint in a soothing, neutral color (avoid white, which can seem harsh and institutional) can frame a home in a much more flattering, inviting light, and even make spaces seem larger and brighter. Experts estimate that exterior painting costs $2,600, on average, and interior painting costs $1,245.

Real Estate Agent Fees (6%)

This is the big one; the average real estate commission is 6%, so it’s going to make up a majority of your selling costs.

The commission is split between the seller’s listing agent, and the buyer’s agent. For that 3%, you’re getting your agent’s help in everything from getting your home ready to be viewed by buyers, to helping you settle on a starting price that will attract serious interest, to negotiating with your eventual buyer to make sure you get the highest possible price. The 3% you pay the buyer’s agent is essentially an enticement for them to bring serious, qualified buyers to see your property.

This system’s been in place for decades, but in the past handful of years, a number of discount services have emerged aimed at cutting seller’s costs. Adventurous sellers can try to sell their home by themselves, as an FSBO (for sale by owner) listing, and many discount brokerages and agents have moved to a flat fee-based pricing structure instead of a percentage-based commission. Sellers beware, though— some barebones discount services give sellers almost zero assistance.

If you’re selling a $200,000 home, paying a flat fee instead of the standard percentage-based commission of $12,000 can mean saving thousands of dollars. For sellers looking to cut costs, commission is the logical starting point.

Landscaping (1%)

Ever heard the term “curb appeal”? It refers to the impression your home makes on a prospective buyer as they get out of their car and walk up to the front of your house. Considering that most buyers decide how they feel about a house within seconds, you could argue that maximizing your home’s curb appeal should be a seller’s top priority.

Aside from improvements made to the house itself, landscaping your yard is the best way to boost your home’s curb appeal. A manicured, healthy yard has tremendous appeal to buyers, especially families, and you should have your yard landscaped before every open house.

Lawn maintenance can be done for only a few hundred dollars, but a major yard overhaul involving trees, flower beds, and hedges will cost an average of $3,200.

Staging (1%)

Don’t underestimate the importance of home staging. According to Zillow, 48% of buyers rated home staging as somewhat, very, or extremely important, and a survey from the National Association of Realtors (NAR) found that staging brought real, concrete increases in sale price. Of seller’s agents surveyed, 29% said staging led to an increase of 1% to 5% in the dollar value of buyer’s offers, and another 21% said they saw increases between 6% and 10%.

Professional home staging services know exactly what buyers want to see, and they know how to present your home in the most flattering light (literally); for a seller trying to bring in a maximum sale price, staging is indispensable. The average cost of home staging is just over $1,100, though there can be monthly charges if you rent furnishings. It’s well worth the investment, though; even a 1% sale price increase on $200,000 would more than pay for itself, while a 10% price increase could bring in $20,000.

Seller Concessions (1.5%-3%)

Just like you have your agent and your priorities, the buyer also has their own agent and their own financial priorities, one of which is paying as little as possible for your home.

Sellers typically ask for 1.5% to 3% of the sale price in seller concessions; how much you concede is up to you and your agent, and is going to depend heavily on your local market.

If your home has been sitting on the market for months, you might want to give a little on the price just to secure the sale; on the other hand, if you had multiple offers within a week of hitting the market, you don’t need to cut the price to get a buyer.

Closing Costs (1%-3%)

For sellers, closing costs usually include property taxes, attorney’s fees, recording fees, transfer taxes, and the closing fee. For a $200,000 house, closing costs would run between $2,000 and $6,000. There aren’t a lot of opportunities here for savings, though; you could pass on a real estate attorney’s services at closing, if your state doesn’t require one, but it could come back to haunt you if there are problems with the paperwork that surface down the line.

Moving (1%)

When you’re planning your move, it’s important to remember that when you move is as important as where you’re moving, and how much stuff you’re staking with you. The summer season, from May to September, is the busiest season for moving, so movers— if you can book them— will be charging premium rates, and moving trucks will be in short supply. If you can accommodate it, moving in the off-season can mean big savings.

The main components of a move are supplies, hiring movers, and renting a moving truck. The average move costs between $2,000 and $5,000, but the opportunities for saving here are obvious; if you can find free boxes (local grocery stores are great sources), get friends or family to help you lug your sofa up and down the stairs, and borrow a friend’s van, you could cut your moving costs down to almost nothing.

Conclusion

While the conventional wisdom is that selling costs around 10%, adding up the charges in this list comes to just over $28,000, which is closer to 15%. While sellers shouldn’t necessarily plan to pay out 15% in closing costs, it shows how quickly these charges can add up if they don’t make a concerted effort to keep costs low, and proactively seek out opportunities for savings.

Sellers should also invest in repairs, staging, and upgrades that actually lead to a higher ROI when they sell. This will help mitigate the costs, and in some cases completely outweigh them.

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About the Author

Ben Mizes

Ben Mizes

Ben Mizes is the co-founder and CEO of Clever Real Estate, the free online service that connects you with top agents to save thousands on commission. He's an active real estate investor with 22 units in St. Louis and a licensed agent in Missouri. Ben enjoys writing about real estate, investing, personal finance, and financial freedom.

Published by Debt.com, LLC