Selling a home is expensive, too: Homeowners typically spend nearly $55,000, report finds

Personal finance

Vm | E+ | Getty Images

Buying a home and maintainingit is expensive, but selling it is costly, too, according to a new report.

It typically costs $54,616 to sell a house in 2024, according to a June 17 report from Clever Real Estate. Almost half of surveyed home sellers, or 42%, said their costs to sell were higher than expected, the report found.

“When people think about selling their home, they’re thinking about how much money they’re going to make from their home sale, and not how much they’re going to spend,” said Jaime Dunaway-Seale, data writer at Clever Real Estate.

“That cost does end up being very high and then they’re caught off guard and disappointed because that’s going to take a cut out of their profit,” Dunaway-Seale said.

In May, Clever Real Estate polled 1,014 Americans who sold a home between 2022 and 2024 about their attitudes related to the home-selling process. It also conducted an analysis of seller costs based on median real estate prices in May.

More from Personal Finance:
Americans struggle to shake off a ‘vibecession’
Why inflation is still upending retirement plans
These are the least difficult areas to buy a home

About 39% of the total cost — $21,603 — is spent on real estate agent commissions, according to the report.

However, as a landmark case involving real estate agent commission fees will soon take effect, sellers will no longer be required to pick up the entire tab. If a seller decides not to pay the buyer’s real estate agent’s commission, it could “drop their cost by about $10,000,” Dunaway-Seale said.

Other typical expenses include doing some home repairs both ahead of the listing and in response to inspections, which Clever Real Estate estimates to cost $10,000; closing costs ($8,000); buyer concessions, or expenses the seller agrees to pay for the buyer to reduce upfront purchase costs, ($7,200); moving costs ($3,250); marketing and advertising costs ($2,300); and staging costs ($2,263).

But home sellers should focus on “maximizing the efficiency of the transaction,” and “not just trying to save on costs,” said Mark Hamrick, senior analyst at Bankrate. 

“Ultimately, [with] many of these fees, there’s no harm in trying to negotiate, and that includes real estate commissions,” Hamrick said.

‘There are plenty of costs involved’

Cost-constrained homebuyers in today’s housing market do not want to inherit homes in need of renovations, according to the Clever Real Estate report.

“There are plenty of costs involved,” said certified financial planner Kashif A. Ahmed, founder and president of American Private Wealth in Bedford, Massachusetts. “You might have to do some renovations to sell it.” 

If a buyer makes it as far as the home inspection process and sees issues in the house that were not noticeable during the initial walkthrough nor disclosed, they may have room to ask the seller to do the necessary repairs, Daryl Fairweather, chief economist at Redfin, recently told CNBC.

That is especially true in housing markets where listed homes are lingering on the market for longer because it gives homebuyers “bargaining power,” according to Orphe Divounguy, a senior economist at Zillow.

Sellers often incur pre- and post-listing repairs, improvements and renovations that can cost around $10,000, according to Clever Real Estate. 

“There may be a situation where a buyer might say, ‘Well, I want you to fix this before I buy it,’ and then you’re like, ‘Well, in the interest of getting rid of this place … I’ll spend the extra money,'” Ahmed said. 

But the highest expenses an owner will face when selling a home are the real estate agent commission fees, Ahmed said.

‘The rule change has not yet gone into effect’

A landmark case is poised to change the way homes are bought and sold in the U.S.

The National Association of Realtors in March agreed to a $418 million settlement in an antitrust lawsuit in which a federal jury found the organization and other real estate brokerages had conspired to artificially inflate agent commissions on the sale and purchase of real estate.

“We went ahead and included it [in the Clever Real Estate analysis] now because, as of right now, the rule change has not yet gone into effect,” said Dunaway-Seale.

A finalized NAR settlement takes effect in August, and there is a “much more defined notion that sellers are not responsible” for a buyer’s real estate agent commissions, said real estate attorney Claudia Cobreiro, the founder of Cobreiro Law in Coral Gables, Florida.

Commission rates have also been removed from the multiple listing system, or MLS, in some areas like Miami, she noted.

The new mandatory MLS policy changes will take effect on August 17, 2024, according to the NAR.

However, “that is the policy side of it,” she said. “The practical side of it is that we are still seeing the notion that Realtors are needed,” and most buyers might not have an extra $10,000 on top of closing costs and the down payment required for the purchase, Cobreiro said.

Dunaway-Seale agreed: “Sellers might not be obligated to pay the buyer’s agent commission, but a lot of them still might as just another incentive to bring buyers in.” 

Ways to reduce costs

A seller has to pay closing costs; everything else depends on the home seller’s priority, or how quickly they need to sell off the property, said Dunaway-Seale.

Here are some ways to cut or reduce expenses associated with selling a house:

1. Sell without a real estate agent: Homeowners could try to sell the house themselves and potentially drop real estate services altogether, said Dunaway-Seale.

“But they’re not going to sell for as much profit,” she said.

Among sellers who did not hire an agent, 59% did so to save money, Clever Real Estate found. But sellers who did work with an agent sold their house for about $34,000 more than those who did not, according to the report.

Keep in mind that going through the transaction without a real estate agent can pose a risk.

Signing the contract is the least of it. There are so many things that happen throughout the transaction that really require the expertise and the navigation by someone who understands the process, Cobreiro previously told CNBC.

“You’re talking about one of the most expensive and consequential transactions of a lifetime,” said Hamrick. “These fees can on the face of it look a bit daunting, but the good news is most people are not going into this where they’re going to essentially lose money on the transaction.”

2. Reduce concessions, staging and marketing costs: “If sellers don’t really care about selling their home quickly, they could possibly offer fewer concessions,” Dunaway-Seale said. Concessions are expenses the seller agrees to pay for to reduce a buyer’s upfront costs.

Lowering the budget for staging and marketing costs can also save on expenses because such tools help draw buyers in, she said.

Articles You May Like

Here’s where 2024 vice presidential picks stand on Social Security as program faces funding shortfall
Activist Starboard took a stake in Match. Here are steps the investor may take to help lift shares
Here are 6 buying categories cheaper today than they were before the pandemic
Activist Elliott reportedly has a significant stake in Starbucks, in talks with management
More teens are working. Here’s why a job is ‘becoming more compelling’ for them, economist says

Leave a Reply

Your email address will not be published. Required fields are marked *