Costs Involved in Selling a Home When You’re Downsizing

There may come a time in your downsizing process when you’re feeling ready to sell your house. Selling a home can be a costly endeavor. What types of costs can you expect? 

Below, I will outline some of the typical categories of costs you might encounter when you’re selling a home in the State of Wisconsin. Because costs change over time and also vary depending on the professionals you hire to execute the process or based on your property value itself, I will not be able to give exact dollar amounts. If you would like to know the approximate costs for selling YOUR home, please reach out and request a seller net sheet. I would be happy to provide that to you! 

Title Fees

In the State of Wisconsin, a title company is involved in the majority of real estate transactions. The title company’s job is to make sure the deed for the property is going to pass from the seller to the buyer free and clear of any liens or other encumbrances. 

Title fees consist of:

• Title Insurance - An insurance policy that protects you and the buyer from defects with the title of the property after closing.
• Deed Preparation - An attorney drafts a deed to transfer the title of the property from the seller to the buyer.
• Gap Endorsement - Another insurance policy that covers any title issues that could arise between when the closing happens and the deed is recorded.
• State Transfer Tax - As of this writing, the State of Wisconsin charges a tax to sellers at a rate of $3 per thousand (based on the purchase price). So if you sell a house worth $500,000, you pay $1500 in transfer taxes.
• Special Assessment Research - The title company has to make sure you don’t owe any special assessments to the municipality and they charge a fee to do this research for you.
• Wire Transfer and Recording Fees - Small fees for wiring money to pay off your mortgage or to put your sale proceeds in your bank account electronically. There is also a small fee for recording your deed.

Realtor Fees

If you use a real estate agent to sell your home, that agent may charge you a commission or flat fee. If the agent works on commission, that amount will be based on the sale price of your house and will be agreed upon at the time of listing, within your listing contract. 

You might also choose to pay a commission to the buyer’s agent who brings a buyer to purchase your home. This is usually negotiated within your offer to purchase.

All real estate commissions are negotiable and are firm specific. You have many different options for pricing and commission structure within the marketplace.

Attorney Fees

In the State of Wisconsin, real estate agents have a limited license to practice law as it relates to real estate transactions. For this reason, if you’re working with a real estate agent for your sale process, you don’t need to also hire an attorney but some consumers feel more comfortable having that added layer of protection.

You also might be selling your house without real estate agents involved. If that’s the case, it would be wise to hire an attorney to help you through the process and paperwork and to protect your interests. Some attorneys work on real estate transactions for a flat cost. Others might charge an hourly fee.

Payoffs and Prorations

Payoffs and prorations aren’t really “home sale expenses,” in my opinion, because you’d have to pay them regardless of whether you hang onto your house or sell it. These will be debited from your settlement statement at closing though, so it’s good to be aware of them. 

• Property tax prorations - Because property taxes are billed in arrears, you will owe property taxes at closing. The amount you owe will be based on the proration rate listed in your offer multiplied by the number of days from the beginning of the year until the day before closing. You will credit this amount to the buyer and then the buyer will pay the full tax bill at the end of the year.
• Mortgage Payoff - If you have any mortgages or home equity lines of credit borrowed against your home, those will need to get paid off at closing.
• Final Utility Bills - You’ll have to close out your final water bill at closing. You will also pay your other final utility bills separately.

Home-Specific Costs

There might be some costs you’ll incur as you prepare your home to sell. Maybe that electrical issue you’ve just lived with all these years finally needs to get fixed before you sell. Or you want to refresh the look and feel of a few spaces to appeal to buyers. I consider these types of costs to also be “home sale costs.” If you’re only doing them to sell your home, they count.

DURING the home sale transaction, you might also have buyers request fixes to defects found during the home inspection. It’s very hard to plan for these costs but they could impact your bottom line at sale, so it’s important to also keep them in mind.

Capital Gains Taxes

Lastly, if you have owned your home for a long time and make a significant profit on the sale, you might owe capital gains taxes. Speak to your tax advisor to plan ahead for this possibility.