As a property owner, you took a hard look at your financial situation, goals, and options and concluded that you should sell your property. Ultimately, we know how difficult that decision is. It may be a primary residence that had a major personal significance to you and your family, or maybe a rental condo that provided income for many years. However, you may have found that the financial benefits of selling the property may now be greater than keeping it. Now, it’s time to understand the next piece of the puzzle in selling your property—the costs.
Understand the Costs of Selling Your Property
Selling a property can be an exciting and rewarding endeavor. However, it’s essential for sellers to be aware of the various costs involved in the process to avoid any surprises. In this article, we will explore the different costs associated with selling a property, including capital gains taxes, closing costs, and various fees such as broker fees.
- Capital Gains Taxes
When selling a property, one of the primary expenses that homeowners need to consider is capital gains tax. Capital gains tax is the tax levied on the profit made from selling a property that has increased in value since it was purchased. In the United States, the current long-term capital gains tax rates for individuals are 0%, 15%, or 20%, depending on the individual’s taxable income and filing status. It’s important to note that these rates apply only to properties held for more than one year. For properties held for less than a year, the short-term capital gains tax rate is equal to the individual’s ordinary income tax rate.
- Closing Costs
Closing costs are another significant expense involved in selling a property. These costs typically include fees for a variety of services required to complete the sale, such as title search, title insurance, attorney fees, recording fees, and transfer taxes. Closing costs can vary depending on the property’s location and the specific services utilized, but they generally range between 2% and 5% of the property’s sale price.
- Broker Fees
Lastly, when selling a property, homeowners often enlist the help of a real estate agent or broker to facilitate the process. In return for their services, brokers typically charge a commission fee, which is usually a percentage of the property’s sale price. Broker fees can vary, but they generally range between 5% and 6% of the sale price. Some brokers may also charge additional fees for marketing and other services, so it’s essential for sellers to discuss and understand the complete fee structure before hiring a broker.
How Will These Costs Stack Up for You?
Your north star for evaluating the benefits of selling your property will be based on whether or not these costs outweigh the profit from selling your property. However, if you plan to replace your property with a new residence or income-generating property, evaluating the benefits carries more complex questions. In our next article, we will discuss the potential costs and benefits of purchasing a new property. Stay tuned!
This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance.There are material risks associated with investing in private placements, DST properties and real estate securities including illiquidity, general market conditions, interest rate risks, financing risks, potentially adverse tax consequences, general economic risks, development risks, and potential loss of the entire investment principal.Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Past performance is not a guarantee of future results.
Advisory Services offered through Asset Strategy Advisors, LLC (ASA), a SEC Registered Investment Advisor. Securities offered through Concorde Investment Services, LLC. (CIS), member FINRA/SIPC. Insurance Services offered through Asset Strategy Financial Group, Inc. (ASFG)”. ASA, CIS and ASFG are separate companies.
