The Do’s and Don’ts of Calculating Net Proceeds from a Home Sale


In selling your home, one of the things you need to do is to calculate your net proceeds. Net proceeds are the money you will earn from selling the house. Doing this will give you additional insight into your home as well as other related transactions.

When computing for your net proceeds, there are things you need to do, as well as those you need to avoid.

Here are the dos when calculating your need proceeds from selling your home.

Do: Estimate a feasible selling price.
You need to make sure that your net proceeds estimate how much your house is worth. Look at how much the house is sold for. Does the price live up to its quality?

If you are unsure about your price or have not decided on a price yet, then the best thing you could do is compare. Go around your neighborhood with a house being sold or newly purchased with the same quality as yours. As much as possible, it has to be in your neighborhood because the prices of homes will differ significantly the farther you search.

What should be your criteria? A few things you need to compare to estimate a fair price for your house are: the number of bedrooms and bathrooms (where you need an exact match), the size (square foot of inside and outside, as well as floor levels), the year when it was built (stay within a five-year range), its current condition, mainly the general state of the place as well as its functionalities, and updates, or modifications done.

In the case that you couldn’t find a home that is precisely comparable to yours, you may look for at least the closest one and make adjustments to the price. For example, if a house has had updates to a kitchen similar to yours, you may subtract the upgrade cost from the house’s total price.

Do: Consider the Costs of Potential Transactions
If it is your first time selling your house, and have no related experience whatsoever, then you may be inclined to seek help from a real estate agent. A real estate agent acts as your representative as you sell the house, and for your house to sell well, you would want it presented well.

Agents are reliable, have attention to detail, and are great negotiators. They can help you sell the house in a shorter period than you probably would if you’re inexperienced. However, that would mean that you will have to pay for them. Real estate agents will typically charge five or six percent off the total price of the house.

Both buyers and sellers can hire an agent to buy or sell a house. There are times where the seller has to pay for the commission of the buyer’s realtor. With this, you need to deduct their fee from your total net proceeds. If you choose not to hire a real estate agent, you have to be very hands on. There are tips you need to do in selling a house without one.

Do: Include Computing Holding Costs
When people purchase a house, the spending does not end the moment they make that purchase. Once the house is acquired, the buyer will be in charge of paying additional living costs, such as electricity and water. But while it is not yet sold, who will be in charge? The answer is the seller.

The longer your house is waiting for a buyer, the more your holding costs will be. Holding costs are the costs of the house you need to pay while you are selling it. That means you are still responsible for the mortgage and other utilities that need paying. Holding costs will range from more than 500 dollars to more than a thousand dollars, depending on how long the house took until it was bought.

If you wish to lessen the money you need to pay for your holding costs, a buyer must be found to buy the house.

As there are things you have to take note of while calculating your assumed net proceeds, there are also things you should not do.

Don’t: Set an unrealistic price.
Before computing your net proceeds, you must make sure that your numbers are accurate. Make sure to put the exact number of your home’s price and the additional costs, such as transactions with realtors and holding costs. However, only do this if you have a fixed price for the house.

If you do not have a price for your house to sell, you have to research how you can put up a price in the most realistic way possible. You may also consult a financial adviser for that matter.

Don’t: Overlook Additional Minor Fees.
Depending on the state you live in, there could be additional fees that either the buyer and seller of the house will pay for.

Examples of these additional fees are escrow fees, where you pay a third party to temporarily hold essential assets. Simultaneously, the transaction is ongoing, a warranty plan, where the seller may or may not be required to pay a year’s worth to the buyer, and a transfer fee, which is a portion of the sales price that the seller typically pays.

A home warranty provides coverage for major home systems and appliances and prevents you from paying expensive repair and replacement costs. If you’re unsure which home warranty is best for you, read this comprehensive guide detailing the top home warranty picks for 2021 and tips for buying the best home warranty.

Takeaway
Calculating your total net proceeds is a way for you to see how much money you have gained and lost while selling your house. Always check the costs that have to be looked after before and during transactions. You may calculate your proceeds through a useful resource such as a net proceeds calculator you can find online.

by Karla Lopez

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