Determining Proceeds of a House Sale

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One of the most common statistics used when gauging the strength of an area's real estate market is the average sale price. When listing a home for sale, most realtors establish a price for the home based on market comps of the area - taking into account what other houses sold for and how the home they are listing compares to those.

However, looking into the Average Sales Price reveals just how misleading it can be. The Average Sales Price is a gross sale price and does not reflect what the Seller actually receives from the sale. The difference between the gross sale price and the net proceeds (the amount the seller gets to keep) is affected by a number of factors.

To determine Net Proceeds, the following costs must be deducted from the Sales Price once it is agreed upon:

5 to 7% for realtor commission
3% toward the buyer's closing costs (on average)
The costs of repairs and upgrades requested by the Realtor to make the house show better: new paint, carpet, minor landscaping, etc.
Sellers share of closing costs such as Transfer Taxes, Deed preparation, Lien Letters, etc.
Holding Costs such as interest on the loan, taxes, insurance, utilities, etc. if the property does not sell right away

After all costs are deducted, the seller often walks away with only 75 to 85% of what the house actually "sold" for.

This should not reflect negatively on realtors by any means — their services are still very much in demand and are invaluable for many home owners — but the more people realize the difference between what their home sells for and what they actually net, the more the number selling their home through "non-traditional" methods continues to rise.

It's easy to find two houses on the same street in any neighborhood in the U.S. where the seller who sold their house for a higher price actually received less money at closing. If real estate prices were discussed in terms of net price to the seller rather than gross sales price, more home owners would discover that, for them, alternate channels for selling their home are more profitable than going through a realtor.

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