How to Calculate Net Proceeds on Selling a House?
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Many homeowners who sell their houses have the ultimate goal of getting decent net proceeds after a tedious home sale transaction. But how important is it to determine and calculate your net proceeds? What does it reflect when you know your estimated net proceeds? And what are the factors that play a significant role in affecting your net proceeds?
All the answers to these questions can be found in this article. Continue reading and find out everything you need to know when it comes to home sale net proceeds.
What are Net Proceeds?
Net proceeds are the take-home money a seller receives after a sale. However, it is essential to know that net proceeds are the difference between the gross proceeds and all the mounting costs that took place during the sale. In layman’s terms, net proceeds are your profit from house sale.
Calculating your Home Sale Net Proceeds is Explained
Calculating your home sale net proceeds is like doing simple math- there’s no tricks and magic for it. Here’s a fundamental and straightforward way to calculate your home sale net proceeds:
01. On a piece of paper, write down your home selling price. Your selling price is what you will post when you list your home in the housing market.
02. List down ALL the transaction costs that took place during the entire process. And by ALL, we mean everything that you spent your money on. Typical transaction costs that mostly takes place during a home sale is as follows:
- Real estate agent fees
- Title, escrow, notary, and transfer tax
- Repairs needed to sell home
- Staging and prep work
- Homeownership and overlap costs
- Moving costs
03. Subtract all the transaction costs from your home sale, and the difference will be your net proceeds.
Home sale price – $100,000
Total transaction cost – $20,000
Seller Net proceeds – $80,000
Fact: Do not be confused between “gross proceeds” and “net proceeds.” Gross proceeds are the TOTAL home sale amount you received when you closed the deal. When you have deducted all the expenses made during the transaction, the remaining amount is what you called the net proceeds.
Answers to Essentials Questions Regarding Net Proceeds
Just like with other potential home sellers, there’s a lot of questions about net proceeds. Here, we have listed the most common ones that might be helpful for your home sale.
Why are my Net Proceeds not the same with my Home Sale?
It is worth noting that while selling a home also you have to spend money, which is why your net proceeds are not the same value as your home sale. Remember, your home sale amount is your gross proceeds, not your take-home money.
You need to pay your agent and other fees incurred during the transaction. What’s left after deducting all the expenses will be your net proceeds, which is less than the amount of your home sale price.
Why is it Important to Calculate my Net Proceeds?
Like in every business or sale, the primary goal is to ensure that the net proceeds are being efficiently utilized and maximized. By that, you must make sure that all expenses made throughout the entire transaction are scrutinized and audited before an action is taken.
Do I get to Earn Higher Net Proceeds in Selling my Home for Cash?
The simple answer is yes. When you sell your home to cash buyers, you exclude many factors that affect your total net proceeds. You don’t need to employ a real estate agent, which means there’s no need to handle fees.
Additionally, there’s no need to spend money on home staging and repairs since most cash buyers tend to buy the home as-is. Lesser transaction costs to deduct from your gross proceeds means you get to save more money.
What are the factors that affect your net proceeds?
Essentially, all transaction costs that will take place during your home sale plays a factor in determining your net proceeds. It’s simple: the more expenses you incur during the home sale period, the lesser the net proceeds you will receive.
However, your mode of selling can play a significant part too. If you are selling to cash buyers, there will be lesser expenses, but if not, be ready to spend your money on a real estate agent, home market listings, repairs, staging, and other necessary expenditures you need to shoulder.
Selling your home occurs just like any other sale. At the end of the day, it’s earning a good profit that matters. Remember that a high selling price is not always the best price. Additionally, your mode of selling has an impact on earning a high profit as well. Take on the road where you can do great and sell fast to make a decent profit.
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