If you’re in the process of selling a home that you have lived in for many years, you may not understand how much money you will receive a deal issigned off and the property closes. However, it is important to consider what your net profit known as the “Net Proceeds” are likely to be once you have sold the property.
What exactly are net proceeds?
In short, net proceeds represent the amount of money a seller takes home from a property sale after deducting the relevant expenses owed to realtors, inspectors and other third parties. It is very important to estimate your net proceeds at the very beginning of the selling process, as it will help you to come up with a realistic asking price. If necessary, you can revise this estimated figure as you get closer to securing a deal with a buyer.
Expenses you may need to deduct from the overall cost of the property include:
Real estate agency fees: These are often commissioned-based. The higher the house sells for, the higher the final fee is likely to be.
Title, notary, escrow, and transfer taxes
Inspections and repairs: Most home sellers enlist home inspectors to identify faults in their properties, which are then repaired before the properties are listed.
Staging and decorative work: This expense will be higher if you spend considerable time and money on making cosmetic improvements to your property and hiring a professional stager.
Seller concessions: The seller may ask you to pay for certain goods or services on their behalf. This could include, amongst other things, repairs or pest removal.
Overlap expenses: Many homeowners need to hire out temporary accommodation if the move-in date for their new home is later than the move-out date for the property they have sold.
Sellers should obtain the endorsement of their bank for a short sale if their net proceeds turn out to be negative.
How to calculate net proceeds
Calculating net proceeds is very simple if you adhere to the following steps:
Record the selling cost of your home.
Make a note of every expense throughout the selling process.
Use a pen and paper or an online net proceeds calculator to deduct all relevant transaction costs from the selling price.
Although a real estate professional will be able to offer advice about your net proceeds, keeping your own record of expenses is very important. As well as ensuring you get a fair deal, it is a good way to stay motivated throughout the selling process.
Finalizing the deal
You must ensure all costs are examined and evaluated before finalizing a deal with a buyer. Be aware that some buyers may ask you to make costly repairs as a condition of the sale, something that could put your potential gains in jeopardy. If this is the case, you may need to engage in some negotiations.
Finally, try not to get mixed up between “gross proceeds” and “net proceeds”. The former refers to the total figure you take from the buyer after finalizing a deal, while the latter is a more important figure which tells you how much you have gained from the negotiation in real terms.