Financial Tips for Home Sellers

Selling your home is likely the biggest financial investment you'll ever make. How do you determine the price to set? And how much will you have to pay in taxes? It's a good idea to know the details before you put your home on the market!

Net Cash From the Sale of Your Home:

Determining your net proceeds
Estimate net proceeds from the sale of your home by starting with the purchase price and subtracting amounts you will have to pay at or before the closing.

Known Costs - Known Costs are considerably the largest costs in the whole process. Your mortgage holder may describe you the amount required to pay off the mortgage, or any prepayment penalty.
Estimated Closing Costs - Closing costs include title and escrow and recording fees.
Other Potential Costs - Half of Buyer's Home Warranty, repairs for termite or roof damage.

Capital Gains and Real Estate:

Paying taxes on your proceeds
When you sell stock not in an IRA you pay taxes on the gain - your profit. In real estate you also owe taxes on the gain but there are several considerations you should take into account. It is always a good idea to review your plans with an accountant or tax attorney before selling a home.

Calculating the Gain:

Determining costs and proceeds
The real estate capital gain is based on the adjusted cost of the home, not what you paid for it. The adjusted cost can be calculated as follows.
Take the sales price and add the adjustments to determine the adjusted cost. Adjustments include:

Purchase costs. Include transfer, escrow, appraisal, and inspection fees. You cannot include the mortgage points you may have paid.
Sale costs. Include inspection fees, escrow fees, broker commissions, and any funds you may have spent to prepare your home for sale.
Improvement costs. Include additions, patios, landscaping, etc. Improvements don't include the repair or replacement of existing elements of the home such as a new roof or air conditioning unit.

Subtract the adjusted cost from the sales price of your home to determine your capital gain.

Exemption for Capital Gain on the Sale of a Primary Residence:

How taxable amounts are determined
From 1997 to the present a married couple is exempt from the gain on real estate up to $500,000 or $250,000 for a single person as long as the following criteria is met:

The home has been your primary residence for 2 out of the past 5 years.
You have not sold another house during the past two years.

The IRS also allows exemptions for "unforeseen circumstances" including job loss, long distant relocations, medical emergencies, divorce, etc. Again, it is critical that you discuss your particular situation with an accountant or tax attorney.

We work hard to exceed your expectations.
Put Your Home Team's real estate experience to work for you!