Are you thinking of selling your house in CA? Then you must be dreaming about earning a profit from it. But selling a house comes with many costs too. Homeowners have to factor in the related expenses to sell their house. The selling cost depends on the buying price, condition, and location of the house. California is a center of attraction. The home prices and living costs in California are relatively higher. Homeowners in CA must strategically minimize the cost to sell the house. Thus they can secure maximum profit.
California Home Selling Expenses
The average cost to sell a house in California is 9.81% of the sale price. Sellers have to pay tons of expenses to sell the house. These expenses include real estate agent commission, mortgage payoff, and other closing costs. Sellers have to pay the closing costs to finalize the deal. Let’s have a look at the various costs associated with selling a house in California.
Real Estate Agent Commission
Real estate agents’ commission is the biggest cost for the seller. In most cases, the sellers have to pay the buyer’s agent fee too. Sellers’ concession is not mandatory but it attracts potential buyers. In California, the average real estate agent commission is 5.11%. The average home value is $784,989 in 2024. The real estate agent’s fee will be $40,113 with the current average home value. Real estate commission rates are higher in big cities. But the sellers have multiple alternatives to avoid the higher commission rate. They can choose FSBO, a discount broker or a flat fee agent.
According to the 2024 legal settlement of the NAR, the buyer’s agent and the buyer have to sign a written agreement. The agreement was signed before touring the home from August 2024. The agreement will include the services the agent will provide and for how much. The listing agent used to collect the fee from the seller. And then they split it with the buyer’s agent. From now on the buyer’s agent will have to negotiate the fee with the buyer. The buyers may have to pay their agent.
Moving Costs
Sellers’ moving costs depend on how far they are moving. Another factor is how many belongings they have. Hiring a professional mover for a longer distance costs a lot. But sellers cannot avoid costs while moving on their own. The average cost of moving to CA ranges between $400 to $5,000. The moving expense can be up to $12,000 according to the distance.
Mortgage Payoff
The seller pays the remaining balance of the mortgage before selling the house. It is an unavoidable cost to sell a house in California. The seller set the selling price of the house aiming to pay off the mortgage. The mortgage payoff amount depends on the mortgage amount and interest rate. The prepayment penalties make the payoff amount much higher.
Maintenance and Repairing Costs
Sellers need to repair and maintain the house before listing. You can avoid this step if you are trying to sell the house as is. The cost of repair and maintenance varies depending on the house’s age and condition. The costs can range from a few dollars to a few thousand. Sellers allocate a budget for home repairs, staging, cleaning, and landscaping. Real estate agents can guide you in this matter. Pre-listing inspection is also a great option. The inspectors will figure out the major issues that may create problems later. The average home inspection cost is $350 in CA. The cost can be up to $10,000.
Legal Fees to Sell a House
It is not mandatory to hire a real estate attorney to sell a house in California. But it is better to have a legal eye on your contract. They help to solve property line disputes and title issues. Real estate attorneys can charge $150 to over $400 per hour.
Seller Concession
Sellers offer concessions to attract potential buyers. It is not essential but the buyers appreciate this gesture. The seller can offer to pay the cost of a one-year home warranty or repair. You have to budget for a thousand dollars to pay for the concession.
HOA Fees
You have to pay prorated membership fees if the neighborhood has a homeowners association. You’ll have to pay your dues, prorated up to the close date. HOA fees in California range between $100 to $1000 depending on the area. You also have to pay HOA transfer fees as a seller. This is to transfer the ownership to the buyer in the HOA records. HOA transfer fees range between $100 to $400 in California.
Title Insurance
Title insurance is another cost sellers typically bear to sell a house in CA. The purpose of title insurance is to protect the buyer and lender from title disputes. The cost of title insurance in California is 0.5% to 1% of your home sale price.
Escrow Fees
Escrow agents are hired to handle the disbursement of funds in the sale. They hold money or property in trust until all conditions of a contract have been met. The buyer and the seller split the escrow fees between them. The fee for each party is approximately $2 per $1,000 purchase price, plus a $200-$250 base fee.
Transfer Taxes
The government charges a transfer tax when a house is sold. The transfer tax rate varies with location and sale price. It is typically paid by the seller.
Prorated Property Tax
Seller must pay the prorated property tax of the house up until the closing date. The property tax rate is 1% of the assessed value of the property.
Hidden Costs to Sell a House in California?
There are some hidden costs to sell a house. Sometimes sellers overlook these hidden costs.
Capital Gain Taxes
Capital gain tax is an expense sellers must carry. Sellers pay capital tax when they earn profit from selling houses. According to the two-year rule, your home has to be your primary residence for two years to get tax exemption. This condition allows individuals to get an exemption of up to $2,50,000 of their capital gain. Married couples can get an exemption of up to $5,00,000. It is wise to consult tax professionals to avoid tax penalties.
Prepayment Penalties
If you finance from lenders, you may have to pay a prepayment penalty for selling your house early. Lenders usually charge 2% to 5% of the remaining loan. This is because they miss out on the interest payment they could receive if you haven’t sold the house.
How to Minimize Costs to Sell a House
Let’s look into several approaches you can take to minimize the costs to sell your house.
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- Sell the Home As-Is: You can put your home for sale without investing in improvements and renovations. You have to tell the potential buyers that you will not pay for any repairs. Thus you can cut the cost of heavy investment in repairs.
- Choose FSBO: You can choose to avoid hiring a real estate agent. In this case, you can save up to 3% if you take the option “For Sale by Owner”. But you may still need to pay the buyer’s agent fees.
- Negotiate Strategically : You must negotiate a lower commission rate with the real estate agent. You can negotiate with the attorneys and appraisers to reduce the home selling costs. In California, buyers pay some closing costs. Sellers should discuss with the buyers to reduce sellers closing costs. You can consult with real estate agents to negotiate with the buyers. They will help you to negotiate and reduce your selling costs.
- Choose Discount Brokers: The discount brokers charge 0.5% to 2% of the selling price. So the cost-sensitive sellers find this alternative enticing.
- Consider Flat Fee Agents: Flat fee agents charge a fixed amount. They do not take a percentage of the selling price like the traditional agents. So, it is a good option for sellers looking to save money.
- Choose High ROI Repairs: Homeowners often spend a hefty amount on repairs. But you should prioritize repairs that will give the best return on investment. Real estate agents can guide you to determine which upgrades are worth the investment.
To Summarize
Selling a house in California involves various expenses. But you can minimize the costs with careful planning. You need to understand the key costs to sell a house in California. Then you can implement strategies to reduce the costs. Thus you can prepare for a fruitful sale. If you want to sell your house in CA, we have you covered. “Company name” helps you to reduce the cost to sell your house in California. We are local experts and can help you strategize the costs. We also offer a much lower commission than traditional real estate agents. So, get in touch with us today and skyrocket your profit!
