How To Figure Out The Net Profit From Selling Your Home?

Here is a very nice article about "Figuring Net Profit from Selling Your Home" from  Elizabeth Weintraub. Following is the entire article.

Every diligent real estate agent I know prepares a net sheet for the seller when signing a listing agreement or presenting a comparative market analysis. Because the second question on sellers' minds — right after real estate commission negotiation — is how much the seller will net. Home sellers expect a reasonable response to: What is the seller's net profit?

To figure a seller's net profit, you need to have access to the expenses of sale. As a Realtor, I compute two net sheets for sellers. The first net sheet is based on receiving full list price.

Closing Statement Debits and Credits

• Seller's Closing Statements

A seller's closing statement, not to be confused with a HUD-1, is a balancing of credits and debits. A credit, for example, is the sales price amount, because that is the amount the seller receives. Debits involve all the costs of sale associated with home selling. Other credits may appear such as prepaid property taxes, which will be prorated, returning to the seller that portion which has been paid in advance for the time period the seller does not own the home.

If sellers are selling without equity, the check the seller brings in to close will be shown as a credit on the closing statement. Absent of seller credits, apart from the sales price, the bottom-line totals of both debits and credits will equal the sales price.

• Buyer's Closing Statements

Buyers, on the other hand, receive a closing statement showing the sales price as a debit, because that is the amount the buyer owes. If the buyer will be paying a tax bill that covers a portion of the time the seller has occupied the property, that amount will show up as a credit to the buyer (and a debit to the seller).

Seller's Closing Statement Debits

The following fees are considered debits to the seller and charged against the sales price. Because a seller's expenses of sale can vary from state to state, county to county and city to city, the example shown is based on a sample closing statement for a seller in Sacramento, CA. Your actual fees may vary. Third-party fees such as those for title policies, escrow companies or real estate commissions will depend on the vendor selected.

• Escrow
These fees can include a basic escrow handling charge, document preparation fee and notary fee.

• Recording
Fees to record the property deed in the public record and any other documents required to clear title.

• Transfer Fees
The city of Sacramento charges .275% of 1% of the sales price and, although negotiable, the seller generally pays it.

• Documentary Transfer Tax to the County
This California fee is computed on 55 cents per $500 of sales price, on full cash transactions. Note: It is not $1.10 per thousand.

• Pest Inspections
The cost to obtain a pest inspection.

• Pest Completion
The cost of work required to issue a clear pest report.

• Natural Hazard Disclosure
A geological and environmental report.

• Home Warranty
Cost of one-year home warranty plan for the buyer.

• Roof Certification
Fee for certifying the roof for 2 to 3 years.

• Repairs
Contractor invoices or buyer credit for request for repair work.

• Buyer Closing Cost Credit
Negotiable sum agreed upon in purchase contract to pay for buyer's closing costs.

• Other Buyer Credits
These can include mortgage buydowns or other fees paid on the buyer's behalf as part of the purchase contract.

• Utility, if applicable
Carmichael Water District, in CA, for example, sends water bills to escrow. In some states, water bills "run with the property" and are not reported to title or escrow, so check to see they are paid.

• Real Property Taxes

Prorata portion is due if the taxes have not yet been paid.

• Homeowner Association Fees

These can include a document preparation charge, as well as a prorata portion of monthly homeowner association dues not yet paid.

• Real Estate Commissions
Payment to listing and buyer's brokers.

• Transaction Coordinator
Fee paid to individual / company handling the transaction's paperwork and seller disclosures.

• Loan Payoffs
The beneficiary demand sets forth the amount due to pay the existing loan(s) in entirety.

• Title
Title policy fee paid for the buyer's owner's title policy.

• Delivery or Courier
Expenses for shipping or transporting documents.

• Wire
This fee is paid to the entity for wiring the seller's net profits to the seller's bank.

Net Profit Due the Seller

First, add up all the charges to determine the total amount of debits. Then add the sales price to the credit prorations. Subtract the credit from the debit. The balance leftover is the seller's net profit of sale.

Providing the seller has sufficient equity, the net profit amount, added to the total debits, will equal the bottom-line credit. This is why the total debit will always equal the total credit on a seller's closing statement.

Article source:
http://homebuying.about.com/od/sellingahouse/qt/092407_netproft.htm
Author: Elizabeth Weintraub. Elizabeth Weintraub has been writing a great deals of articles related to real estate buying and selling.

Comment on this article:

It would be profect if a spreadsheet is attached with this article, which allows readers to use for the calculation. I think this is especially useful for the home sellers who are doing for sale by owner. I will probably create such a tool and place a link  here and let the readers to download. Let me see if I can get some time to do this. Stay tuned….

Related artilces on closing:

http://besthomesellingtips.com/2007/09/04/top-3-reasons-why-home-sales-fall-apart-and-how-to-stop-it-from-happening/

 

 

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