Whether you are selling retail, wholesale, or analyzing a flip project, the costs can sometimes be tricky to figure out. It’s not just estimating the sales price and backing the loan amount out of the proceeds. There are many fees involved that can sting a seller if unaware. This is where experience and some simple tools come in handy.
For retail sales, your favorite title company can drum up an estimated cost sheet with your potential sales price. Or, you can usually get the title company to give you a net sheet spreadsheet or a link to their website, which many of them have a seller’s and buyer’s net sheet program. If you are an agent, doing it yourself can save time and help establish your expertise. Remember to remind the seller that this is an estimate, however, the better you get at filling in the net sheet (and comping properties) the closer you will be to the exact net number. I like to give a worst case scenario, then the client is happy when I negotiate a better deal. The following are included in a typical net sheet:
- CA Withholdings: If this is an investment property and you are not selling in a corporation and you are receiving a gain, the state of California withholds 3 1/3% of the sales price . Ugh – no one likes to pay this and it’s a surprise to your clients at closing if they are unaware.
- Purchase Price: Again, if you don’t have an accepted offer/contract on the property, then this is an estimate based on your ability to know the market. This is selling 101 for any agent – become good at valuing properties.
- Title Insurance / Escrow Fee / City and County Transfer Tax – All of these are part of the real estate purchase contract and can be negotiated as to who pays. Currently in Sacramento, CA the custom is for the seller to pay for title fees, city and county transfer taxes. The escrow fee is usually split 50/50 between the buyer and seller. Title and Escrow fees are set and published yearly by the companies and tend to be competitively price so that there is not a huge price variation between one company to the next
- City transfer taxes are calculated by multiplying the [potential] sales price by $2.75 and dividing by 1000. I see this one split more often as the sale price rises.
- County transfer taxes are calculated by multiplying the [potential] sales price by $1.10 and dividing by 1000.
- Real Estate Commissions – usually split between listing and buyer’s agent, unless one agent handles both sides of the deal. In Sacramento, commissions typically ranges between 5-6% depending on the experience, services provided, and what is negotiated
- Loan amount, plus fees associated with payoff.
- Natural Hazard Disclosure Report – 99% of the time, the seller pay for this. The main company in town charges $99, but there are a few that charge less.
- Pest Report – typically the buyer pays for this and their home inspection, unless the buyer has a VA loan, then the seller is required to purchase the pest report. Also, this specialized company is mainly looking for termites, wood-boring beetles, and fungus that causes dry rot, not mice, rat, bats, and other pest. Depending on the size of the house, you can get a report and inspection for $100-150.
- Home Warranty – many buyers ask for the seller to provide a year home warranty. Depending on the size of the house and item covered, typically they range between $350-500.
- Other Costs and Credits: Depending on what is negotiated, there can be other costs associated with closing the deal
- Credit to buyer for closing costs – lenders typically allow up to 3% of the purchase priced to be credited to a buyer
- After inspection and due diligence has been completed by the buyer, many times a request for repairs or credit is issued to the seller. Is it nearly impossible to estimate or predict.
- I some times charge a transaction coordination fee to pay for the file auditing ($350-400)
- “Junk Fees” – There are about 4-8 escrow/title fees that fall under this category. Doc. prep, courier, notary, drawing fee, etc. – think $250-500. The net sheet I use through a title co. auto-fills these categories.
Here’s a sample net sheet:
|SELLER’S NET SHEET|
|Address:||SACRAMENTO, CA 95818||Est. Close Date:||6/28/2016|
|Prepared by:||Keith Klassen, Klassen & Associates, 916.595.7900||Annual Taxes:||$0.00|
|Estimated Sales Price:||$645000.00||1st Loan Balance:||$385000.00||Interest:||$|
|Approx. Gross Equity:||$260000.00||2nd Loan Balance:||$0||Interest:||$|
|CA Withholding (3 1/3% of sales price):||$|
|County Transfer Tax:||Paid by: Seller||$709.50|
|City Transfer Tax:||Paid by: Seller||$1773.75|
|Title Insurance Premium (Owner’s Policy):||Paid by: Seller||$1815.00|
|Escrow Fees:||Paid by: Both||$712.50|
|EWC Drawing Fee:||$0.00|
|Courier Fee (includes Federal Express):||$40.00|
|Total Commission:||6.00% + $0||$38700.00|
|Transaction Coordination Fee:||$350.00|
|First Loan Balance:||$385000.00|
|Interest on 1st Loan:||$|
|Second Loan Balance:||$0|
|Interest on 2nd Loan:||$|
|Natural Hazard Disclosure Report:||$99.00|
|Pest Control Report:||$125.00|
|Work Required for Pest Clearance:||$|
|Tax Proration (if not paid to date of recording):||$|
|Total Estimated Costs to Seller:||$429999.75|
|CREDITS TO SELLER|
|Total Estimated Credits to Seller:||$0|
|CASH TO SELLER|
|Estimated Sales Price:||$645000.00|
|Plus Estimated Credits:||$0|
|Less Estimated Costs:||$429999.75|
|Estimated Sale Proceeds to Seller:||$215000.25|
Contact me if you’d like a complimentary value assessment done on your property, or to discuss the costs of selling in detail.
Keith Klassen – Real Estate Broker