Figuring out costs of buying and selling a house

[labdogs42]

We are thinking about moving to be closer to our jobs and my son's school, but I'm a little freaked out by the whole process! We have been in our home for over 12 years and this is the first home we have ever owned. It was in a new development when we bought it and we watched it be built. So, I have never had to sell a house before and I have never bought a house that someone else lived in. I also don't have a clue how to figure out what it truly costs in realtor fees, transfer taxes, etc. Are there any good calculators/websites out there? I know banks will tell you what they will lend you, but that's usually some out there number that is more than makes sense to spend. How do I figure out the real numbers? Any suggestions? Any tips on buying, selling, and moving (or choosing not to move) would be appreciated!

 

[Cheshire Figment]

Dig out the HUD Form 1 from when you bought the home. This is a legal-size sheet printed on two side with a column on each side for the buyer and for the seller.

Your "basis" is the contract purchase price plus certain of the other items in the "buyer" column. Add to that any improvements (not just minor repairs) to the property. The result is your "adjusted basis". This is from the original purchase.

You will have "costs of sale" which will include the Realtor's commission as well as several of the closing costs on the Seller. A Real Estate Agent or Title Company can give you estimates of these numbers; for the tax return itself you will go by the Selling HUD-1.

Take the contract selling price, subtract the costs of sale which gives you the Net Selling Price. Subtract the Adjusted Basis from that to get the Gain (or loss) on sale.

If you have a loss stop there. If you have a Gain you will have to fill in a Schedule D on your tax return. If the gain is less than $500,000 there is no tax consequences; if more than $500,000 the excess will be Long Term Capital Gain.

 

[bdcp]

Dig out the HUD Form 1 from when you bought the home. This is a legal-size sheet printed on two side with a column on each side for the buyer and for the seller.

Your "basis" is the contract purchase price plus certain of the other items in the "buyer" column. Add to that any improvements (not just minor repairs) to the property. The result is your "adjusted basis". This is from the original purchase.

You will have "costs of sale" which will include the Realtor's commission as well as several of the closing costs on the Seller. A Real Estate Agent or Title Company can give you estimates of these numbers; for the tax return itself you will go by the Selling HUD-1.

Take the contract selling price, subtract the costs of sale which gives you the Net Selling Price. Subtract the Adjusted Basis from that to get the Gain (or loss) on sale.

If you have a loss stop there. If you have a Gain you will have to fill in a Schedule D on your tax return. If the gain is less than $500,000 there is no tax consequences; if more than $500,000 the excess will be Long Term Capital Gain.

You don't pay capital gains unless you don't buy another home during a specific time frame. They plan to buy another home, so NO CAPITAL GAINS taxes. You didn't answer the OP's question. I'm not sure what question you thought you were answering.

The answers are more along the lines of your HUD-1 will give you a general idea of percentages of price that you'll have to pay as a buyer and a seller. In general, real estate commissions are around 6% (paid by seller). There are certain things you have to "pay up front" at closing and you'll need a deposit. If you have high enough income, you can close on the new house anytime, but if not you'll need to close on the old one before the new one, possibly the same day depending on the laws of your state. Talk to real estate agents. It costs you nothing and that way you can interview them before you select one. BTW, my dad is an agent so I've seen a lot of the process. We also are on our 4th home. We've closed in every order possible, including owning two homes for one month while waiting for our buyers to close after we'd moved into our new home. The one we're in now, since 2003, we qualified to own both homes, but closed the same day, new one first, then old one three hours later.

 

[allyphoe]

CF, the sale of a personal residence with all of the gain excludable under Sec 121 doesn't need to go on the Sch D at all, unless there's a 1099-S involved.

BD, the "buy another house" rule went out in 1997.

OP, I agree that the going rate for realtor's commissions is 6%. The rest of the selling expenses are likely to be minor, unless your house has some issue that you need to fix in order to make the deal go through. Costs for buying from someone else are similar to the costs for buying from the developer - the bulk is going to be mortgage-related (points, escrow funding, etc.) You'll also have inspection fees and title insurance (get your own policy in addition to the "standard" charge that protects the bank, but not you, against title issues) and a bazillion tiny little things.

 

[pantherlj]

We are thinking about moving to be closer to our jobs and my son's school, but I'm a little freaked out by the whole process! We have been in our home for over 12 years and this is the first home we have ever owned. It was in a new development when we bought it and we watched it be built. So, I have never had to sell a house before and I have never bought a house that someone else lived in. I also don't have a clue how to figure out what it truly costs in realtor fees, transfer taxes, etc. Are there any good calculators/websites out there? I know banks will tell you what they will lend you, but that's usually some out there number that is more than makes sense to spend. How do I figure out the real numbers? Any suggestions? Any tips on buying, selling, and moving (or choosing not to move) would be appreciated!

Wow, I am in the same EXACT position!! 12 years, new development when we bought, watched it built, first home and now considering a change.

I too worry about the costs and fees plus the darn stress of a move. And, my girls are older with friends so an added issue! A slight twist is we would have to research new schools as we would change districts.
I look forward to what others have to say.

 

[kathie859]

OP...a licensed realtor can help you with fees, transfer tax calculations etc.

The mortgage loan officer at your bank can take whatever you want to spend monthly for housing (principle/interest/taxes/insurance) and help you back into how much of a mortgage that you would be comfortable handling.

Good luck...

 

[minnie1928]

If I remember correctly PA has a 1% transfer tax that is paid by both the seller and buyer.

But as far as digging out your old HUD, that's a good idea. It will give you an idea of the different types of fees that were paid by the seller.

 

[Cheshire Figment]

You don't pay capital gains unless you don't buy another home during a specific time frame. They plan to buy another home, so NO CAPITAL GAINS taxes. You didn't answer the OP's question. I'm not sure what question you thought you were answering.

Sorry but you are totally wrong!. The rule about requiring a replacement residence went out in the late 1990's. As long as you do not do it more often than once every 24 months, each person is allowed to exclude up to $250,000 in gain from that sale of their primary residence. And for a married couple it is $500,000.

Mike (CPA)

 

[bdcp]

Sorry but you are totally wrong!. The rule about requiring a replacement residence went out in the late 1990's. As long as you do not do it more often than once every 24 months, each person is allowed to exclude up to $250,000 in gain from that sale of their primary residence. And for a married couple it is $500,000.

Mike (CPA)

WTH? Whoa, that was my point. There is no capital gains issue. OP didn't ask about Capital Gains did they? I addressed their ACTUAL question.

Where exactly am I WRONG? I never said what you seem to think I SAID. What are you talking about. I know the rules. We've owned 4 homes.

YOU are the one who brought Capital Gains into this. The OP has been in their home 12 years so it is NOT AN ISSUE.

Yes, the exemptions exist,BUT THIS DOES NOT APPLY TO OP. DOES IT????????????

BTW, I highly doubt the OP will be making a profit of 500K.

The problem is you Didn't answer the op's question. You decided they needed to know all about Capital Gains for some strange, weird reason.

 

[pantherlj]

A second post from me ... what about the "extra costs" such as a moving company? I wouldn't consider a UHaul this go round - I am too old

 

[bdcp]

We've used a moving company for 3 of our 4 moves. Well worth the money. We have a really good one locally that is used by quite a few high end clients. They're not expensive, but they are good.

 

[minnie1928]

A second post from me ... what about the "extra costs" such as a moving company? I wouldn't consider a UHaul this go round - I am too old

If you go to a movers website, or something like moving.com you should be able to get a ballpark estimate. Moving fees vary widely based on whether or not you pack it, how far, if you buy boxes, the amount of stuff, etc. My mom moved her apartment for $600. Moving from PA to NJ cost several thousand since we didn't pack our own stuff (employer paid relocation).

 

[barkley]

if you bought new in a development you might want to look back at your purchasing paperwork and see if there were any special bonds you have been paying on. this was realy common in the new developments we lived in/near-the builders passed them along to the new homeowners and they could run as long as 15 years. when we sold it was a sellers market so the new owners assumed these, but current sellers are having to pay these off as an incentive to their buyers. that could add some expense.

as for misc. expenses when we moved-new deposits with the new utility companies, some cancellation fees with companies that we had contracts with that did'nt offer services in the new location, some new expenses for services that were previously provided "free" (subsidized by taxes) in our former city, different rate for internet (provider we previously had did'nt serve new area, and the only one in the new area did'nt offer as good deals).

for any area you are looking at you might want to check out what the taxes are like, we live in an area where theres a difference in taxes based on what street you live on (driven by the school district and their bonds), also some cities charge much higher taxes than neighboring cities. you can check with your insurance agent as well, rates can be significantly higher for home and auto one city to another.

when we purchased our first home it was not brand new, so we had the realtor request a water and utility statement that covered the previous years usage and cost. that way we could get an idea of how much the house used (and what the energy efficiency was like).

 

[labdogs42]

Good ideas! Especially the utility thing. I wonder about that, especially if the new house would have gas or oil or something else for heat (we have electric now).

 

[minnie1928]

when we purchased our first home it was not brand new, so we had the realtor request a water and utility statement that covered the previous years usage and cost. that way we could get an idea of how much the house used (and what the energy efficiency was like).

Use this information with a grain of salt. There are soooo many variables in this mix that it can make it difficult to be reliable. Perhaps the prior family had 6 people and loved a 78 degree house in the winter and a 68 degree house in the summer. Or, they walked around wrapped up in 6 layers of clothing so they could keep the thermostat set at 52 in the winter. Lifestyle, in my opinion, is as big of a factor (or bigger in some cases) as the efficiency of the house.

 

[bellarella]

Where exactly am I WRONG? I never said what you seem to think I SAID. What are you talking about. I know the rules. We've owned 4 homes.

YOU are the one who brought Capital Gains into this. The OP has been in their home 12 years so it is NOT AN ISSUE.

If you would calm down and reread CF's posts and your own, you would see that you gave incorrect information.

You don't pay capital gains unless you don't buy another home during a specific time frame. They plan to buy another home, so NO CAPITAL GAINS taxes.

You said that as long as she was buying another house, there would be no capital gains taxes. That is no longer correct information.

In the 90s, and for a long period before, you were able to avoid capital gains on a house sale by taking the profit and using it to buy another home. That rule is no longer in place.

The new rule is the one that CF stated: there are no capital gains period on profits below the $250/500k mark. There is no need put the sale proceeds into a new home.

OP asked all of the possible fees. CF gave the rule on cap gains, which is a concern for some people. More information is never a bad thing. No harm, no foul.

Happy new year!

 

[labdogs42]

Whoa. Somehow I missed a few posts there. Not sure how I did that. As for the Cg thing, I won't be making $250,000 or $500, 000 on the sale, so that's good. (well, it would be lovely if I was making that much, but we're not even close!)

Wow, I am in the same EXACT position!! 12 years, new development when we bought, watched it built, first home and now considering a change.

I too worry about the costs and fees plus the darn stress of a move. And, my girls are older with friends so an added issue! A slight twist is we would have to research new schools as we would change districts.
I look forward to what others have to say.

Well, my son actually goes to Catholic school, so we're looking closer to his school, so that's good. And he's only in kindy, so no major friend losses at stake.

OP...a licensed realtor can help you with fees, transfer tax calculations etc.

The mortgage loan officer at your bank can take whatever you want to spend monthly for housing (principle/interest/taxes/insurance) and help you back into how much of a mortgage that you would be comfortable handling.

Good luck...

We do have a realtor and we need to talk to the bank. I'm just always suspicious that they will try to talk me into more house than I can truly afford.

Every time I get this idea to move, I end up coming back around to thinking that maybe I should just stay put! Moving seems like SO much work! If I had to move, it would be one thing, but to willingly pack up all this crap and take it somewhere else (or worse, pay movers to move it) just seems so insane! We'll see where we end up, we did see some nice houses the other day.

 

[lastminutemom]

What is the housing market like where you are? Are things selling? If they are, about how long are they taking? There is, in my opinion, a tremendous amount of stress in keeping a house "show ready" all the time, unless you are an impeccable housekeeper, which you might be.

If the market is slow in your area, are you going to be able to drop the price to make your house sell? You should be able to get a better deal on the buying side as well, but for many folks it is very difficult emotionally to drop the price of their house.

 

[labdogs42]

What is the housing market like where you are? Are things selling? If they are, about how long are they taking? There is, in my opinion, a tremendous amount of stress in keeping a house "show ready" all the time, unless you are an impeccable housekeeper, which you might be.

If the market is slow in your area, are you going to be able to drop the price to make your house sell? You should be able to get a better deal on the buying side as well, but for many folks it is very difficult emotionally to drop the price of their house.

I am NOT an impeccable housekeeper, so the stress of even thinking about getting my house show ready is pretty considerable. The more I think about this, the less I want to move! I'm still going to see what my Realtor comes back with as far as comps for our house and the one we're looking at, but I'm leaning toward staying put at this point!

 

[angwill]

Funny I just watched Clark Howard today who said he suggests not spending more than 1/4th of your gross pay on a home. I think the normal rule of thumb is 1/3rd though. Figure out what that would be for you and don't worry about what the bankers tell you they feel you can afford. I don't think too many are going that far out of range anymore anyway.

We are also looking to move and a realtor friend told me you need a credit score around 720/750 or more and don't go to a mortgage broker go to the bank you choose.

I hope some of that helps. Sorry if I told you more than what you asked but it helped me to know these things.