| Once you have determined a fair market
price for your Huntsville Alabama home, you can calculate your bottom line. This
is the amount that you will net (get a check for) after paying all of the
expenses associated with selling a home.
Remember, by selling your home yourself, the only
cost you avoid is the real estate agent’s commission. You will still
have to pay all of the other closing costs, just like any other seller.
Closing costs vary from area to area and also
depend on how each individual contract is structured. The following are
items that you may need to deduct from your sales price to determine your
net proceeds:
MORTGAGES OR LOANS - Any first, second, etc.
loans, or mortgages. Also any liens that occurred if you used your home as
collateral. Call or write your lender and ask for the amount to pay the
loan in full (often not the same as the principal balance).
LOAN DISCOUNT POINTS - In many areas it is
customary for the seller to pay points on the buyers loan. This is
negotiable, except on certain government loans. One point is equal to one
percent of the loan amount (not sales price). For example, if the sales
price was $175,000, and the buyer put a 10% down payment of $17,500, the
loan amount would be $157,500. One discount point would be $1,575, two
points $3,150, etc.
PRORATED INTEREST - Mortgage interest is generally
charged in arrears. This means that when you make your July payment, you
are actually paying interest for June. So if your home sale closes on July
26th , you will still owe interest for 26 days even though you already
made your payment on July 1st.
BUYERS CLOSING COSTS - Many buyers will ask the
seller to pay part or all of their closing costs. On some government loans
it is required by law that the seller pay them. These costs can include,
but are not limited to: loan application fees, credit report, loan
origination fee (usually 1% of the loan amount), loan discount points,
title, escrow, and attorney’s fees, funding fees, tax service, mortgage
insurance premiums, and impounds for taxes, insurance, and interest.
ATTORNEY FEES - Everyone loves lawyers!
ESCROW FEES - Escrow companies are disinterested
third parties that hold funds, handle paperwork, and make sure that all
necessary conditions are met before releasing money or transferring title.
TRANSFER TAXES/CHARGES - Transfer fees are often
charged by state or local governments as a way to increase revenue. They
vary widely, and are often based on a percentage of the sales price.
APPRAISAL FEES - If the buyer is obtaining new
financing for the purchase, the lender will require a professional
appraisal on the house. This is another negotiable item, but is often paid
by the seller in some areas.
TERMITE INSPECTIONS - Required on some government
loans, and requested by many buyers.
STRUCTURAL/GENERAL INSPECTIONS - Professional
independent inspection services are required by law in some areas and
often requested by buyers to make them more confident about the purchase.
TITLE INSURANCE FEES - Title insurance protects
the buyer and lender against issues of improper ownership or transfer. The
title insurance company will research the title to make sure there are no
liens, judgements, or clouds on the title that would effect the ownership
rights.
HOMEOWNER ASSOCIATION FEES - If the area has a HOA,
chances are that there will be a fee to transfer from one owner to the
next.
PREPAYMENT PENALTIES - Many private and some
conventional loans have specific monetary penalties if the loan is paid
off prior to a certain date.
RECONVEYANCE FEES - This fee may be charged by an
attorney or escrow company to clear off the lien on the title when your
existing loan is paid off at closing.
FAILURE TO NOTIFY PENALTIES - Some government
lenders can charge one extra months interest if you fail to notify them at
least 30 days in advance of your intent to pay off the loan.
ASSUMPTION FEES - Loans that are being assumed by
the buyer often have an assumption fee charged by the lender.
HOME WARRANTY COVERAGE - Depending on the plan, a
home warranty covers items in the house plumbing, electrical, appliances,
etc.) for a period of usually one year.
For a list of specific charges, you can contact a
title/escrow office, mortgage lender, or a real estate attorney. Of
course, I would be happy to provide you with a net proceeds analysis at no
cost or obligation.
After completing the first two steps in the
process, it is entirely possible that you may decide not to sell after
all. Perhaps the market values are not what you had thought, and you won’t
be able to net enough money on the sale to be able to accomplish your next
goal.
The important thing is to accept the realities of
the market. If the timing isn’t right for you, it isn’t right!
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