If you’re thinking about selling your home, one of the most important questions probably isn’t, “How much is my house worth?”
It’s “How much money will I actually walk away with after the sale?”
A home’s sale price is only the starting point. Your net proceeds from selling a home depend on several factors, including your mortgage balance, real estate excise tax, real estate commissions and other transaction costs, repairs, concessions, and other expenses.
For homeowners in North Seattle, the Eastside and Snohomish County, understanding these costs before putting your home on the market can help you make better decisions about pricing, repairs and timing.
Here’s what you need to know about calculating your potential seller net proceeds in Washington State.
Start With Your Estimated Home Sale Price
The first number in the calculation is the expected selling price of your home.
Determining that number isn’t as simple as looking at an online home-value estimate. Your home’s market value can be affected by its location, size, condition, lot, updates, views, school boundaries, neighborhood, competition and recent comparable sales.
For example, two similar homes in Lynnwood, Kirkland, Bothell or Edmonds could have significantly different values depending on their condition and location.
A real estate professional can prepare a comparative market analysis (CMA) using recent sales and current competition to develop a realistic estimate of what your home could potentially sell for.
Once you have an estimated sale price, you can begin calculating your estimated net proceeds.
Your Mortgage Payoff Can Make a Big Difference
Your outstanding mortgage balance is often one of the largest deductions from the sale price.
Suppose your home sells for $900,000, but you still owe $400,000 on your mortgage.
That doesn’t mean you have $500,000 in profit. It means approximately $500,000 remains before accounting for selling expenses and other deductions.
Your actual payoff amount can be somewhat different from the balance shown on your latest mortgage statement because of accrued interest, fees or other adjustments.
If you have a second mortgage, home equity line of credit (HELOC), or other lien against the property, those obligations may also need to be paid from the proceeds.
Washington Real Estate Excise Tax (REET)
Washington State charges a Real Estate Excise Tax (REET) when real property is sold. The tax is generally a seller expense and is based on the selling price.
Washington’s REET structure uses graduated rates, and local REET may also apply. The exact amount depends on the property’s sale price and applicable location. The Washington Department of Revenue notes that REET rates can range from 1.1% to 3%, depending on the transaction and applicable rate structure.
For that reason, sellers shouldn’t simply assume that a flat percentage of their sale price will always represent their REET obligation.
Your escrow or title company can provide the applicable calculation for your transaction.
Real Estate Commission and Other Professional Fees
Another significant consideration is the cost of selling the property, including compensation paid to real estate professionals involved in the transaction.
The amount and structure of compensation can vary and are negotiable. Depending on the transaction, there may also be other professional or transaction-related costs.
Rather than focusing exclusively on the commission percentage, sellers should consider the total cost of selling the home compared with the service, marketing, negotiation and results provided.
A knowledgeable listing agent should be able to explain the anticipated costs before you commit to putting your home on the market.
Title, Escrow and Other Closing Costs
There can be additional costs associated with completing a home sale, including title and escrow charges, recording fees and other transaction expenses.
Some expenses may be negotiated between the buyer and seller, while others are associated with specific services or requirements of the transaction.
There can also be prorated expenses, such as property taxes, utilities or HOA-related charges, depending on the property and closing date.
These individual costs may seem relatively small compared with the sale price, but together they can make a meaningful difference in your net proceeds from selling your home.
Repairs and Improvements Before Selling
The money you spend preparing your home can also affect how much you ultimately net.
For example, you might spend money on:
- Roof repairs
- Interior or exterior painting
- Flooring
- Landscaping
- Plumbing or electrical repairs
- HVAC service
- Cleaning
- Staging
- Pre-inspection
- Other improvements
The important question isn’t simply “What can I improve?”
It’s “Which improvements are likely to provide enough benefit to justify the cost?”
A $20,000 renovation doesn’t necessarily add $20,000 to your home’s value. In some cases, relatively inexpensive repairs and cosmetic improvements can have a greater impact than a major remodel.
This is one reason it’s valuable to discuss your plans with an experienced local real estate professional before spending money on improvements.
Seller Concessions and Negotiated Costs
In some transactions, a seller may agree to pay certain costs or provide a credit to the buyer.
Depending on the circumstances, this could include a contribution toward closing costs, repairs or other negotiated expenses.
For example, if you sell your home for $900,000 but agree to provide a $10,000 buyer credit, your gross proceeds are reduced by that amount.
Seller concessions can be an important part of negotiating a transaction, particularly when buyers are comparing multiple properties.
What About Capital Gains Tax in Washington?
This is an area where Washington homeowners sometimes become confused.
Washington’s capital gains tax does not apply to the sale or exchange of real estate, according to the Washington State Department of Revenue. This is separate from the Real Estate Excise Tax that applies to qualifying real estate transactions.
That doesn’t necessarily mean there are never federal tax considerations associated with selling a home. Your individual circumstances—including how long you’ve owned the property, whether it has been your primary residence, and your tax basis—can affect your federal tax situation.
For questions about your specific tax circumstances, it’s appropriate to consult a qualified tax professional.
A Simple Example of Calculating Net Proceeds
Here’s a simplified illustration:
Estimated sale price: $900,000
Mortgage payoff: -$400,000
REET: -$X
Real estate compensation: -$X
Title/escrow and other closing costs: -$X
Repairs/preparation: -$X
Seller concessions: -$X
Estimated net proceeds: $XXX,XXX
The exact result can vary considerably from one homeowner to another.
That’s why a seller net proceeds estimate based on your actual property, mortgage balance, expected sale price and anticipated selling expenses is much more useful than simply multiplying your home’s estimated value by a percentage.
Don’t Confuse Home Equity With Cash You’ll Receive
One of the most important distinctions for sellers is the difference between home equity and net proceeds.
If your home is worth $900,000 and you owe $400,000, you have approximately $500,000 in gross equity.
But you won’t necessarily receive $500,000 at closing.
Selling expenses, taxes, commissions, repairs, concessions and other costs can reduce the amount you ultimately receive.
Understanding this difference can help you make more informed decisions about your next home, your moving budget and your overall financial plans.
Find Out What You Could Actually Net From Your Home Sale
If you’re considering selling your home in the next six to twelve months, you don’t have to wait until you’re ready to list to figure out what your numbers might look like.
The Grant Team can help you estimate your home’s potential market value, review the costs associated with selling, identify repairs or improvements that may make sense, and develop an estimated seller net proceeds calculation based on your particular situation.
Whether you’re selling in Seattle, Shoreline, Lake Forest Park, Bothell, Kirkland, Bellevue, Lynnwood, Edmonds, Mukilteo, Mill Creek, Everett or elsewhere in King or Snohomish County, getting a realistic picture of your potential net proceeds can be an important first step.
Contact The Grant Team today. We’ll help you understand what your home could potentially sell for, what you can expect to pay to sell it, and—most importantly—how much you may actually walk away with.