For the vast majority of Americans, their home is their most valuable asset, and selling that home brings an unprecedented, once-in-a-lifetime infusion of capital. But what many homeowners don’t realize— especially first-time sellers— is how much it actually costs to sell a house.
Make no mistake about it; in the end, you’re still probably coming out way ahead. But the process of preparing a home for the market, and taking that property through the sale and closing process requires some upfront investment of time and, yes, cold hard cash.
So how much does it cost to sell a house? There’s no single one-size-fits-all number that’s going to describe everyone’s situation. Many of the largest costs of selling – like real estate commission – are calculated as a percentage of the final sale price, so the more your home sells for, the more you’ll pay in commission.
But we can look at the needs of typical home sellers, discuss average costs of those services, and come up with a range of numbers that are appropriate for an average home. Let’s go down the list of those essential services for sellers, and do some back-of-the-envelope math.
Costs Associated with Selling a Home
The truth is, very few homes can hit the market as-is and command a price that’s anything close to their fair market value. Everyday life puts a lot of miles on a home, and every year you live in a property, features and finishes are getting incrementally less in-fashion.
So for a prospective seller asking themselves how much it costs to sell their house, the answer is going to depend a lot on how long they’ve lived in that house. We’ll get into that in more detail below.
You also have to take into account that selling a house is a lot more complicated than selling, say, a sofa, or a car. Property sales are regulated by a complicated web of local, state, and federal laws, which is why the closing process requires so much paperwork and, often, the involvement of attorneys.
The sale itself takes time, too. We’ve all heard stories about homes that get multiple offers the first weekend they’re on the market, but the typical property takes weeks or months to find a buyer— according to Zillow, most houses take an average of 65-93 days to sell.
That means your agent is conducting multiple weekends of open houses, possibly supplemented by evening and weekday showings, and spending time at the negotiating table once you receive an initial offer. They deserve to be paid for their time, though we’ll cover below whether the typical real estate commission is actually a good value.
Then there’s the closing process, which includes many smaller fees that can add up quickly; typical closing costs can climb as high as 3% of the final sale price, and that doesn’t include real estate commission. In total, it’s not rare for a seller to shell out 10% of the final sale price for commission and all the assorted closing costs.
For reference, 10% closing costs for a home that sold for the U.S. median value of $252,000 would be $25,200 – significant money by any standard.
Let’s look closely at what that 10% consists of, and talk about easy ways to cut those costs down.
Realtor’s Commission Fees
Let’s start with the big one. Typical real estate commission is 6% of the final sale price, and is paid by the seller. Commission is deducted from the sale proceeds at closing, and split among the listing agent and the listing agent’s broker, and the buyer’s agent and their broker. That means each agent actually receives a quarter (or less, depending on the split they’ve worked out with their brokerage) of the total commission.
For a home that sells for the U.S. median value of $252,000, 6% commission would come to $15,120.
To break it down further, each agent would make about $3,780 from the sale, if they’ve worked out a 50/50 split with their brokerage.
Commission is arguably the biggest cost associated with selling your house, but a good agent brings a lot to the table. They negotiate with the buyer’s agent to bring you the best possible price, guide you through the labyrinthine closing process, conduct showings and open houses, market and advertise your home, and help you prepare your home for the market– an overlooked part of the sale process which we’ll cover in the next section.
But are they worth 6%? That’s a harder question to answer. In some cases, yes, especially when a home sale takes a lot of time and effort to get across the finish line. If your sale is more straightforward, with immediate interest and a fast closing, 6% might be overpaying. So how do you reduce the amount of real estate commission you end up paying?
One common alternative is to use a discount agent. These agents charge less than 3%, but they also offer fewer services. Remember the reason we say “less than 3%” is that, according to the way commission is split among the listing agent and the buyer’s agent, the seller really only has control over how much they pay their listing agent. The buyer’s agent will almost always receive 3% for bringing a qualified buyer to the table.
So a seller using a discount agent can often cut that 3% down to 2% or even down to a mere 1% listing fee. But they’ll also be receiving less help over the course of the sale process. Some discount agents don’t hold open houses, while others may not assist you with pricing strategy or negotiations. So really, it becomes a question of value: how much commission are you paying, and what are you receiving for that money?
The idea is to receive a full service sale experience at a lower cost – which, in the modern age, is actually a possibility. Companies like Clever Real Estate connect home sellers with elite local agents who’ve already agreed to provide a five-star, full-service sale experience for a lower commission – in Clever’s case, their agents charge a flat fee of $3,000, or 1% if your home sells for more than $350,000. For a seller who’s looking to cut costs, but still wants to receive the full spectrum of agent services, this is clearly the best option.
Of course, a seller who wants to cut costs down to the bare bones can always sell their home as a “for sale by owner” (FSBO) listing. But most sellers don’t realize how much work it takes to sell their home without an agent, and they may not even understand how much it actually costs to sell a house by owner.
For example, even though FSBO sales avoid paying the listing agent commission entirely, they almost always have to pay the 3% buyer’s agent commission—meaning they’re only cutting their total commission in half, not eliminating it entirely. FSBO sales also come with some significant drawbacks, which we’ll cover in a section below.
Before we get to that, let’s review some other typical costs associated with selling your home.
Paying for a pre-sale inspection isn’t a requirement, but it can save you a lot of trouble down the line, especially if you live in an old house.
Once you find a buyer and settle on a sale price, that buyer will usually have an inspection done to make sure there are no underlying problems with the property. If their inspection uncovers flaws in the house, they may ask you to perform repairs, or ask for a price reduction equal to the cost of those repairs.
Worst yet, if the problems are serious – for example, a cracked foundation or leaky roof – they may exercise their inspection contingency and walk away from the deal. Or they might ask for a significant reduction in price.
Having your own pre-sale inspection done helps you get ahead of these problems. Once your inspection identifies potential problem areas, you can either perform the repairs yourself or disclose them to the buyer before their inspection.. And if you’re willing to do a little of the work yourself, or find a reputable contractor, you can make repairs to your home and still make a good profit on the sale.
Home inspections typically cost $400-$600.
Nearly everyone will want to make some home repairs before listing their home. This could cover everything from cosmetic improvements to big, expensive repairs on the roof or major systems like heating or plumbing.
If you’ve lived in your home for more than a few years, it will likely need new finishes to get the best possible price. Features like light fixtures, cabinets and counters, and wall and floor treatments tend to go out of fashion in less than a decade. At the very least, you’ll want to give the interior a fresh coat of paint, which is proven to be the easiest, and most cost-effective way to boost the value of your home, especially if you choose the right colors.
You’ll also want to address the findings of the home inspection, if you had one done. Any major red flags will be discovered by the buyer’s inspection, so it’s best to address them now. This cost is going to depend on how much work your home needs, and how much you decide to do. When you’re deciding how much to put into repairs, it’s best to consult a resource that shows average cost vs. average return for different home renovations.
For example, according to Remodeling, a new garage door will recoup 94.5% of its cost, while a major kitchen remodel will recoup less than 54%. However, your actual ROI will depend greatly on the contractor you use, the quality of the work, and how much the buyer cares about the repairs.
Home staging covers everything from decluttering and deep cleaning to renting new furnishings for the main rooms of your home. A survey from the National Association of Realtors (NAR) on home staging shows that professionally staged homes sell faster, and for more money, than homes that aren’t staged; 29% of agents surveyed said they saw a 1%-5% increase in sale price due to effective home staging, and another 21% reported an increase in sale price of 6%-10%.
A professional home staging service knows exactly what buyers want to see in a home, and they know how to show your home off to its greatest advantage. If needed, they’ll remove your furnishings and replace them with selections of their own. If you opt for this deluxe package, you’ll generally pay a monthly fee for however long your home stays on the market. Sellers can also purchase a one-time consultation where the home staging professional will advise them on what changes would make their home more appealing to buyers.
Nationally, average costs for home staging fall between $2,300 and $3,200.
If you haven’t paid off your mortgage at the time of the sale, you’ll have to pay your loan off out of the sale proceeds. There can be some confusion, though, about how much you actually owe. The outstanding amount on your most recent mortgage statement doesn’t give a complete accounting of how much you’ll have to pay; mortgage interest accrues on a daily basis, so you’ll owe interest right up until the day of closing, on top of your outstanding balance.
Some mortgages also have a prepayment penalty; consult the fine print on your loan papers, or contact your lender, to find out if you’ll have to pay a penalty for settling early.
Mortgage prepayment penalties are usually expressed as a percentage of the loan, and run in the neighborhood of 3%-4%. So if you’re paying off a mortgage for $200,000, a typical penalty would be $6,000-$8,000.
Closing costs include everything from the title search, to title insurance, transfer taxes, pro-rated property taxes, pest inspections, and document fees. We’re not including real estate commission in this category, though you could consider commission a closing cost.
Excluding real estate commission, closing costs typically come to 1-3% of the final sale price. For a home that sells for the U.S. median home value of $252,000, that comes to a range of $2,520-$7,560.
Capital Gains Tax
Adults have a capital gains tax exemption on $250,000 profit from a home sale (for individuals), or $500,000 (for couples filing jointly), as long as they lived in the house for two out of the previous five years. That means that if you cleared less than those amounts, you won’t be on the hook for capital gains taxes.
However, if your profit exceeds your exemption, you’ll have to pay capital gains on the profit. This can be a big chunk of taxes, depending on how much you made. Consult the IRS website for details.
Average Cost to Sell a House
Now that we’ve gone down the full list, let’s look at the average total costs of selling a home for the median U.S. value of $252,000.
|Home Sale Price||$252,000|
|Real Estate Commission||$15,120 (6%)|
|Capital Gains Tax||Varies|
Note that we used the low end of each estimate, so this is a conservative guess at the total costs, that doesn’t include potential home repairs. Expressed as a percentage, this number is about 10.5% of the sale price.
How Much Does It Cost to Sell a House by Owner?
When you take a comprehensive look at how much it costs to sell a house, it’s natural to conclude that the best way to save a lot of money is to just sell your house yourself, without any agent. After all, real estate commission is the largest single cost associated with the home sale, so eliminating that 6% off the top is an easy way to reduce your costs.
But that’s not quite how it works. As we discussed above, the two agents split the 6% commission. The listing agent (and their broker) gets their 3% for all the work they do for the seller; marketing the home, helping with pricing, conducting showings, and negotiations. Selling without an agent would eliminate that 3%.
But the buyer’s agent (and their broker) is paid for bringing the buyer to the deal. That means their 3% is beyond the control of the seller, and generally non-negotiable. So selling without an agent doesn’t eliminate commission; it gets the seller a 50% discount.
Still, lowering your commission by half sounds like a great deal to most people, especially when that 50% equals thousands of dollars. But if you zoom out to the big picture, it’s not so cut and dried.
Selling without an agent means the seller has to take on all the responsibilities that the agent would’ve handled. That means the seller is going to have to market their home themselves, settle on an enticing, fair market price, conduct showings, and negotiate with the buyer’s agent. That’s a lot to ask of someone who isn’t a real estate professional, and it’s reasonable to assume that there’s going to be a significant dropoff in quality when you go from an experienced real estate agent to an untrained novice.
The data supports this conclusion. Sellers received on average 5.82% more money for a home when using an agent, compared to selling it on their own. More specifically, according to numbers from the National Association of Realtors (NAR), FSBO listings sold for an average of $200,000, while agent-assisted listings sold for an average of $280,000.
The upshot of all this is what you save on commission is probably going to be dwarfed by what you lose on the final sale price. Think of it as winning the battle, but losing the war.
In the end, it’s not about how much you’re paying in selling costs as much as it’s about what you’re getting for that money. There’s fat to trim from every real estate transaction, but when you start cutting essential services, you could bring down your final sale price quite a bit more than your expenses.
That’s exactly why it makes sense for sellers to consider using a discount agent. Companies like our partner Clever Real Estate pre-negotiate low commission rates with top, local agents, and connect them with quality sellers. A Clever agent provides a full service sale experience for a flat fee of only $3,000, or 1% if your home sells for more than $350,000, so it’s a great way for sellers to cut their costs while still getting a full slate of services. Contact Clever today for a free, no strings attached consultation!