Nearly $21,000 – roughly enough to buy a 2019 Honda Civic. That is the average amount home sellers across the U.S. shell out to part with their homes, according to a recent analysis by Zillow and Thumbtack.
In red-hot locales, barring costs such as insurance and filing fees, the figure quadruples. In San Jose, California, for instance, it is close to $84,000. Meanwhile, in St. Louis, selling costs hover around $13,000.
No matter the city, a for-sale sign spawns expenses that begin to amass even before a house hits the market.
“A lot of sellers oftentimes focus on exclusively the sales price and see big dollar signs in terms of what they expect to get after they close,” says Sarah Mikhitarian, senior economist at Zillow. “But, of course, there are costs involved.”
While they depend on local laws and unique arrangements, some of the most common outlays for a seller include:
- Carrying costs
- Losses due to inability to sell
- Closing fees
According to Zillow’s 2018 Consumer Housing Trends Report, nearly 80% of sellers carry out at least one prelisting project, aside from the usual decluttering and cleaning. Interior painting is the most likely one, followed by cosmetic updates to floors, bathrooms and the yard, which could add up to several thousands of dollars.
Such enhancements spruce up a home, adding heft to the asking price. Yet, many major undertakings – a complete kitchen remodel or a pool installation, for example – may negate the intended outcome.
“Sellers have to be careful when it comes to the difference between preparing and repairing a home,” says Katie Severance, with Prominent Properties Sotheby’s International Realty in Essex County, New Jersey. “(D)epending on the cost of renovations, there is no guarantee that they are going to get it back.”
In the National Association of Realtors' 2019 Profile of Home Staging report, 83% of buyers’ agents stated that their clients found a staged home easier to imagine as a future residence.
“When people can say, ‘Wow, I can see myself living here,’ that is when they start making offers,” says Karen Parziale, professional stager and owner of The Real Estate Staging Studio as well as a certified feng shui consultant.
Crucial for the living room, master bedroom and kitchen, staging as part of a home's marketing can bolster the closing price. According to the NAR, over 35% of polled sellers’ agents and nearly as many buyers’ agents reported a boost in a staged home’s value of up to 10%.
Staging might also alter the time a property spends on the market.
“A lot of my listings sell faster when they are staged,” says Mark Trompeter of The Trompeter Group in Jersey City, New Jersey.
But the benefits of staging come with costs. In New Jersey, where Parziale operates, a vacant, one-bedroom condo could absorb over $1,000 in staging fees and furniture rent for three months. For suburban, three-bedroom houses, the charge easily surpasses $5,000.
Depending on local industry customs, the seller, the agent or both may cover the expense. But some real estate brokerages are introducing novel payment options. Compass, for instance, recently unveiled a concierge program that offers sellers no-interest credit for aesthetic upgrades and staging that they repay at closing.
“A lot of people would love to have staging and painting (but) it is expensive to put those costs out,” says Lisa Optican, a real estate agent and director of luxury sales for Compass in Los Angeles. “The fact that we can cover (minor updates and staging) and just advance (expenses) for them is a huge benefit.”
Carry Costs and Losses
While a home stays on the market, the seller shoulders the so-called carrying expenses of mortgage payments and any homeowners association fees, among other monthly costs. During that span, if the property is vacant, its insurance is likely to spike.
“The insurance community feels that homes that are occupied are better maintained and protected,” Severance says. “There could be an increase in the insurance,” for estates that are not.
If the search for a buyer takes a long time, a seller may incur the costs linked to a house’s inability to quickly change hands.
“A home that has a long market time tends to be discounted by the buying public, either by not even coming to look at it or when they do come to look at it, expecting to pay a lower price,” says Mario Greco of The MG Group in Chicago. Thus, a home’s blemished profile – even if entirely rooted in perception – could trim thousands of dollars in seller’s profits.
An adept agent can avert a scenario where the seller “leaves money on the table,” Severance says. That's why she sees the real estate commission as an investment.
Subject to negotiations, the commission fluctuates between 5% and 6% of the closing price, and carries the stakes of both the seller’s and the buyer’s agents. It is the seller, though, who pays it.
The higher the closing price, the higher the commission, which is often the largest cost in a real estate transaction. In some of the country’s most prohibitive housing markets, excluding the luxury segment, it can reach over $70,000 – as is the case in San Jose. The average for the country is a bit over $13,500.
Myriad fees define the closing process. From title transfer to escrow to homeowners insurance, the closing costs heaped on a seller vary with local laws and practices. In some states, where statutes bar agents and title companies from offering legal advice, a seller may pay for an attorney.
A seller might also pick up a customary home inspection and any preclosing repairs in addition to extending deal sweeteners. The feasibility of the latter hinges on the state of the market. In Chicago, where closing incentives are rare, a home warranty is the usual token of a seller’s largesse, Greco says.
Up to $250,000 in capital gains from a home sale – or $500,000 for joint filers – is exempt from income taxes, contingent on ownership and use requirements.
Gains result from subtracting a house’s basis from its closing price. The basis is a composite of the home’s value when last purchased and any later capital improvements less losses and, if the home partially served business purposes, depreciation. Think of the basis as the cost of the property accumulated over the years of ownership.
Not subject to tax deductions, major upgrades that prolong a house’s life or introduce new functionalities raise that cost and, thus, reduce the realized sale gain, says David L. Cameron, professor and associate director of the tax program at Northwestern Pritzker School of Law.
If the gain exceeds the exempted amounts, a home enhancement, hence, might decrease the size of taxes owed.
Aside from possible capital gains levies, home sellers may also owe local transfer or sales taxes that often equal a percentage of the closing price. When the latter, however, does not surpass the basis or the outstanding mortgage, a loss occurs, which, on a personal-use property, receives no tax relief.
“We frequently talk in terms of gains but at least in the last decade, there has been as much loss from the sale of homes as there have been gains,” says Cameron.
Get the right energy to sell.
Whether it takes a kitchen cabinet update or extensive home staging, a little extra work from a home seller can go a long way toward attracting more buyers who are willing to put up more money. The secret to optimally staging your home may be what you least expect: the art of feng shui. The ancient Chinese practice meant to bring balance and harmony with the natural world indoors isn’t just about properly aligning energy – or chi – but it can ensure you’re not accidentally turning off buyers. A 2015 Better Homes and Gardens Real Estate and Asian Real Estate Association America survey of more than 500 Chinese-Americans found 86 percent of respondents plan to factor in feng shui for future homebuying decisions. To avoid unintentionally sending a fair share of potential homebuyers away from your property, it’s important to consider the basics of feng shui as you prepare your home for the market.Get familiar with the bagua map.
Get familiar with the bagua map.
A key concept of feng shui is use of the bagua map, which assigns energies and purpose to various parts of the house. These include career, knowledge and cultivation, family health, wealth, fame and reputation, relationships, children and creativity, and helpful people and travel. To determine which part of the house is suited to each focus, there are two schools of thought: the classic compass bagua, which uses a magnetic compass and assigns a direction to each focus, and the three-door gate of chi bagua, which places the entry to the home in either knowledge and cultivation, career or helpful people and travel sectors.Use the bagua to encourage a good deal.
Use the bagua to encourage a good deal.
Depending on the school of thought you prefer, you can play up certain colors, materials and themes to help provide the right energy for each space. Focusing on certain areas you’d like to improve in your life – or your home – can help you achieve your goals. “When you’re selling, focus on the helpful people sector – those are the people that are going to buy your house,” says Jennifer A. Emmer, a feng shui master and interior designer, and owner of Feng Shui Style, a company based in the San Francisco Bay Area. The helpful people sector is a good place to express gratitude for the people and things that have helped you succeed in life through art or photos, as well as playing up the use of metal and silver or gray colors, per the bagua recommendations.Make the front door appealing.
Make the front door appealing.
Regardless of where your house’s entrance may fall on the bagua map, you want to focus on curb appeal to attract buyers. Feng shui calls for a clear path to the entrance, a well-lit front door and an easily identifiable home – so make sure it’s easy to read the house number from the street. Flowers and plants are always a welcome addition, but they should be healthy. Dead plants on the front step should be removed. “It may seem obvious, but people do overlook them,” Emmer says.Keep the windows clean.
Keep the windows clean.
Cleaning is a must when it comes to preparing your home for market, but it may be a good idea to place an emphasis on clean windows. Carol Olmstead, owner of Feng Shui for Real Life and author of “Feng Shui Quick Guide for Home and Office: Secrets for Attracting Wealth, Harmony and Love,” explains that feng shui considers windows the eyes to the home, and dirty windows can make your goals for the home difficult to envision. “If you have clear windows, you have a clear vision of what’s going to happen with this house,” she says.Put a table in the entryway.
Put a table in the entryway.
Just past the front door, the entryway to the home is also important. Renae Jensen, founder of the Conscious Design Institute, says the entryway is the space where a visitor steps from a public space to a private one, so it’s important to ensure that transition is positive. She recommends placing a small side table beside of the door: “It’s important that there’s a small table there – it’s called a compassion area. It shows that you’re a compassionate person, and it allows the person to pause.” It's also a good place for your real estate agent to leave business cards, Jensen notes.Strategically place mirrors throughout the home.
Strategically place mirrors throughout the home.
Mirrors hold a lot of power in feng shui because they reflect energy, which can be a good or bad thing depending on what they capture. “Watch what your mirror is reflecting,” Jensen says. “If it’s reflecting clutter or garbage, it’s going to double it.” But when placed in the proper spot, a mirror can help harness the energy of the space and increase it positively. Emmer says she previously helped stage a home featured on an episode of HGTV's "Flip It to Win It," where the master bedroom was in the wealth sector of the bagua map – a part of the home that, when focused on, can help encourage your personal wealth. At Emmer's suggestion, the property owners used the reds, blues and purples that are best for that section, and she placed an octagonal mirror – a powerful shape in feng shui, as it’s the shape of the classic bagua map – above the bed. Emmer says the home sold for almost 40 percent over asking price.Use color according to a room's bagua alignment.
Use color according to a room's bagua alignment.
As with the wealth section, there are colors that best play into each part of the bagua map. If you’re looking to add a fresh coat of paint to the interior parts of your home, you may as well play off the recommendations that best harness the chi in each space. “Paint the front door an appropriate color based on the sector,” Emmer recommends. For example, a front door in the career section of the home could be best improved if painted blue or black, while a room in the love and relationships section can become a shade of red, white or pink.Declutter your home.
Declutter your home.
Regardless of whether you want to embrace feng shui, you should declutter your home before displaying it for potential buyers – and the reason is the same both in and out of the design practice. “Clutter is about procrastination [and] depression. It will show you are blocking life, and it will … make people feel overwhelmed,” Jensen says. Plus, no one can decide whether they like a room if it’s stuffed with furniture and feels small.Depersonalize the space.
Depersonalize the space.
Like decluttering, it’s important to remove images of yourself, your family and your friends. These photos not only make it hard for a buyer to picture himself or herself in the home, they also give off an energy that you’re not ready to leave yet, Jensen says. Packing up those photos and other mementos that hold a lot of personal value but aren’t important for staging “allows the seller to make a physical, emotional move,” she says.Pack a few boxes.
Pack a few boxes.
Since you’re already packing up some of your more personal pieces of décor, you should also take a few items that help symbolize to you that you’re ready to move on to a new home. Olmstead tells her clients to pack five of their prized possessions in boxes to “show they are ready and willing to go.” It not only helps you prepare to start new elsewhere, but when potential buyers see a few boxes off to the side or in the garage, they can sense you’re ready to go and the house is ready for new memories.Incorporate images of nature.
Incorporate images of nature.
When it comes to displaying art in the home, Jensen recommends images of nature because they often appeal to everyone. She recalls working with a senior living facility that had artwork throughout the property featuring women on their own. “I told them, ‘One of an older adult’s fears is being alone, and you have single pictures [showing that] all over,’” she says. Colorful images of trees or flowers are far more likely to help incorporate cheer rather than play into someone’s subconscious fears.Bring in fresh plants and flowers.
Bring in fresh plants and flowers.
Flowers and a houseplant or two can be solid additions to any staged room. Plus, by bringing nature indoors, you’re creating the balance you’re looking for. “It’s important to see something alive in the house,” Emmer says. It also hearkens back to the primary goal of feng shui: to harness the balance we get in the natural world and achieve that same feeling indoors. As Olmstead explains: “Feng shui principles give us a way of making our indoor flow, and make it feel the way we feel when we’re outdoors.”Keep scent in mind.
Keep scent in mind.
No one wants to walk into a house and smell garbage, stale air or an overwhelming chemical scent. A person’s sense of smell is also important in harnessing a positive energy with feng shui. “Smell is almost more powerful than visual,” Jensen says. Fresh flowers and plants can certainly help, as well as scented candles and general cleanliness. You want your house to both look and smell inviting.Don't block a room's pathways with furniture.
Don't block a room's pathways with furniture.
Promoting the right energy in a space also comes from allowing it to flow freely around the room, so don’t block natural pathways in your home with furniture. Jensen particularly notes that seeing the back of a couch when a person walks in the room gives a closed-off feeling that can turn off potential buyers. “It’s like the house is saying, ‘I really don’t want you here,’” she says.Know when you've got bad feng shui.
Know when you've got bad feng shui.
There are some things about a house that just doesn’t give off a good energy that followers of feng shui will likely notice. A property that stands at the end of a T intersection, for example, has too much energy pushed toward it all the time. An irregularly shaped lot can also be problematic, Emmer says: “A triangular plot represents fire,” which can make it difficult for those inside the house to feel positive energy. While those features may serve as red flags to devout feng shui fans, you can use the principles of feng shui to repair the problems and appeal to other buyers with the right focus and energy.Read More