How to Calculate the Net Proceeds From the Sale of Your Home
If you are thinking about selling your home, one of the first questions you may have is how much money you can expect to walk away with. You may not know the exact answer to this question until you have a contract on your home, but you can definitely get a good idea beforehand. It all begins with the price you set for your home sale.
When you plan to sell your home with The Chad Wilson Group, pricing it properly from the start is the central component of our marketing strategy. A home’s original asking price sets the course for how long it will take to sell and how much you will ultimately get for the home.
Hope is not a pricing strategy
“Need to sell for” is not a pricing strategy
“Want to sell for” is not a pricing strategy.
The simple fact is, your home is worth exactly what a ready, willing, and able buyer is willing to pay for it. So, how you price your home from the beginning will have a direct impact on your net proceeds when the sale closes. Let’s take a closer look at what net proceeds are and how you can calculate them.
What exactly are net proceeds in real estate?
Net proceeds are exactly how much you will take away from your home sale at closing. In almost any situation, this amount is going to be less than what your home is worth, what you list it for, and even what it sells for. To figure out exactly how much money you will put into your pocket, you need to take into account costs like real estate commissions, taxes and fees, and the outstanding balance on your current mortgage.
Why do I need to know my potential net proceeds?
Every home seller’s goal is to walk away with the most amount of money possible. Having a solid idea of what your net proceeds will be before you list your home can help you make decisions about things like repairs and improvements to make sure you are making wise investments that will add true value to your home sale. Having a good idea of how much money you get at closing will also help you decide how much you can pay for a new home, since you will likely be using those proceeds as a down payment for another home.
Our team will work with you as a seller to determine your potential list price and estimate potential costs to sell your home in the St. Louis area, so you can have a solid idea of what your net proceeds will be before you make a decision to sell or put your home on the market.
What expenses do I need to consider in my net proceeds calculation?
It is important that you factor ALL of the transaction costs that take place throughout the entire selling process. Typical costs to consider include:
Real estate agent fees
The seller typically pays commission for their own agent as well as the buyer’s agent. Commission can vary depending on if you have selected full-service agents or limited-service discount agents.
Generally speaking at least some small repairs will need to be made to make your home the most appealing to buyers and get the most from your sale. Any costs related to repairs or improvements made to prepare for the listing should be considered in your net proceeds.
Staging costs (if applicable)
Staging is a crucial part of maximizing your net proceeds from the sale of your home. While you must consider the return on investment when staging your home, it can often be done without spending a lot of money.
The Chad Wilson Group provides free professional staging consultation and photography to every seller, allowing you to save time and money. See the benefits of professional staging and photography for your home sale here.
Inspection related repairs & seller concessions
Typically, once you accept a contract on your home, the buyer will have a home inspection performed. Oftentimes, they will ask that repairs be made based on this inspection. The exact repairs are agreed upon between the buyer and the seller in the contract negotiations, but these are costs you need to work into your net proceeds.
Additionally, you may agree to seller concessions. This is when the home seller agrees with the buyer to pay a portion of their expenses. Most frequently this involves covering some or all of the buyer's closing costs. Seller concessions are determined by the current market conditions and what terms you are willing to accept as the seller in the sale contract.
Home ownership overlap
Depending on your situation, it is possible that you may own both the new house you have purchased and the house you are trying to sell. Costs associated with this overlap need to be considered.
Not only might you agree to contribute to your buyer’s closing costs, you will also encounter closing costs of your own. Closing costs include things like title, transfer tax, notary fees, and more.
Outstanding mortgage balance
Finally, you need to consider the outstanding balance of your current mortgage of the home you plan to sell. This will need to be paid off when you sell the home and must be used in your net proceeds calculations.
How do I calculate my net proceeds?
Calculate the net proceeds of your sale by doing the following:
1. Write down the selling price (or potential selling price) of your home.
2. Subtract ALL selling costs (listed above) from this amount.
For example, if you sell your home for $240,000, with selling costs of $170,000 (including an outstanding balance on your current mortgage of $145,000), your net proceeds will be $70,000 represented in the equation below.
$240,000 (home sale price) - $170,000 (selling costs) = $70,000 (net proceeds from your sale)
Having a solid idea of how much money you will walk away with from the closing table plays a part in many of the decisions you make about selling your home. Our team has helped thousands of home sellers and buyers in the Greater St. Louis area, including St. Louis, St. Charles, Lincoln, and Warren Counties. We will use our data-driven pricing strategies to determine the best price to list your home for sale, and will help you consider all of the costs associated with the sale, so you can have a really good idea of your expected net proceeds at closing.
If you have any questions, would like to meet with one of our team members, or would like to get the listing process started, contact us today!