Happy New Year and welcome to our weekly real estate questions from blog and social media followers, clients and others. Have a question? Use the form below to ask your question and receive an answer via email, usually within 24 hours. We post the most interesting questions here each Friday for the benefit of all our readers.
This week’s question: Up Front Home Selling Costs
“I’m considering selling my home. Are there any up front home selling costs?” A.W., Walnut Creek, CA
Yes, there are several home selling costs that must be paid at the time the service is delivered or must be paid eventually regardless of whether or not a sale ever takes place. Costs can vary based on the property type and location, here is a short list of examples.
Home Repairs and Clean Up. Getting the best possible sale price and terms requires that the property is in the best possible shape. Investing in repairs and clean up can not only attract higher offers, it might determine how long it takes for sellers to make offers. Very few contractors will accept payment through escrow when a sale closes, those that do typically charge a premium for the risk.
Inspections. Inspections often reveal items that should be repaired before a home is offered for sale. Most inspection companies bill for their report when it is delivered, others accept payment at time of sale (through escrow when escrow closes). However, the obligation to pay for the report is incurred when the report is delivered. If the sale is cancelled, the seller must still pay for the report. Inspections could include general, roof, electrical, plumbing, pool, solar system, pest, water well and septic system.
Environmental Reports. Sale of California homes (please check with your local agent if you’re in another state) require disclosure of existing or potential environmental hazards, such as earthquake/fault zones, flood zones and close proximity to hazardous waste disposal sites. These reports are provided to potential buyers before they make an offer. Like inspection reports, environmental report invoices must be paid whether the home sells or not.
Homeowner Association Disclosures. If the property is governed by a homeowner association (HOA), the association or the association’s management company will charge a fee to provide current copies of Bylaws, CC&R’s, financial statements and other disclosures that must be provided to buyers before escrow closes. This fee usually must be paid up front or when the documents are delivered.
Premium Marketing. Most brokers provide comprehensive marketing programs for which they pay all costs in anticipation of completing the sale and collecting a commission. If the sale is cancelled, they absorb the loss. If a seller wants additional promotions at a cost that exceeds the broker’s marketing budget for the property, the seller can offer to pay the costs. If the sale is cancelled, the seller is still obligated to pay all premium marketing costs.
Appraisal. Most sellers base their asking price and negotiated sale price on their personal opinion of the home’s value and the listing agent’s Comparative Market Analysis or Broker Price Opinion). Unless the transaction is a probate sale, there is usually no requirement to order a formal appraisal up front. If the seller does want a formal appraisal to confirm their value opinion, the cost of the appraisal is usually paid upon delivery.
Survey. Homes with larger lots or that have property boundaries which are difficult to identify should be surveyed prior to sale. Surveyors will prepare an updated map and mark boundaries and easements with stakes or ground paint. The primary purpose of the survey is to identify property boundaries for potential buyers, but the survey can also help sellers identify and resolve any boundary line conflicts with neighbors, such as encroachment. Survey costs are usually paid up front or when the survey report is delivered.
There may be other up front home selling costs that apply to your situation. Consult a qualified broker in your area for specific recommendations.
NOTE: Real estate questions are answered within the scope of real estate broker expertise and are not intended to offer legal or tax advice. Contact a qualified legal or tax professional for questions regarding those specialties.
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