What Are The Costs of Selling My Home or Condo on Maui?
Maui is a wonderful place to live or own a second home, but there may come a time when you are ready to sell your home. Perhaps you are moving away from the island or excited to upgrade or downsize to a new home or condo on Maui soon. Finances play a major role in many people’s decisions to sell.
While your attention may initially focus on determining a realistic home sale price, there are costs of selling a home that will require your attention. The seller usually pays closing costs like real estate agent commissions, title insurance, and any pre-sale repairs. There will also likely be withholdings for HARPTA and FIRPTA to pay any applicable capital gains taxes. Understanding the costs of selling a home is essential for preparing for this significant transaction.
The Usual Costs of Selling a Home
Generally, the costs of selling a home can easily reach tens or even hundreds of thousands of dollars. Numerous factors impact the actual costs that you will pay at closing. If the equity in your home does not cover all of the expenses, you will need to come to the closing table with additional funds. Thanks to the excellent real estate market in recent years, however, many sellers can yield a solid return from their real estate transactions.
The specific costs will vary from transaction to transaction, but you can reasonably expect to pay roughly 5% to 6%, depending on the deal you have with your realtor, of the property sales price in real estate agent commission fees. In addition, you are responsible for property taxes for the portion of the year you owned the house.
Typically, the seller pays for the buyer’s title insurance. This varies by title company, but a reasonable estimate is 1% of the sales price. An additional escrow fee may be required and is often 0.5% of the sales price. The seller pays the transfer tax, which varies based on location. There may also be an attorney’s fee. If you would like a specific breakdown of this, I can put together what we call a seller's net sheet with a local title and escrow company
Some real estate transactions may include additional costs. For example, some sellers may sweeten the deal with a seller concession. This concession may cover some of the buyer’s closing costs, outstanding home repairs, or other expenses. A home warranty, home inspection, and professional staging may also need to be calculated.
Potential Selling Costs:
Real estate agent commission fees
Property taxes (for the portion of the year corresponding to you)
Buyer’s title insurance
Buyer’s closing costs (or part of them)
Outstanding home repairs and other miscellaneous expenses
Capital gains tax
When selling your house, it is important to know your current mortgage payoff amount. Your outstanding mortgage balance must be paid in full in order for the title to convey to the new buyer.
The amount of money you may owe or receive at closing is determined by subtracting all the closing costs and the mortgage payoff amount from the sales price. Keep in mind that you may be required to pay capital gains taxes on the sales proceeds. You should consult with an accountant to determine what your capital gains taxes may be.
Is profit from selling a house considered income?
You must report any gains resulting from the sale of your home as part of your taxable income. However, if the profit stems from your primary residence and you have lived there for a certain amount of time, you can exclude up to $250,000 from your income if you file as single or up to $500,000 if you file as joint, given that you meet certain requirements.
Overlooking the important matter of moving costs is unfortunately common. Moving your belongings out of your current house and into a new home could cost a few thousand dollars or more.
Additional funds may be required to set up utility services, decorate your new home to suit your preferences, and tend to any repairs the previous owner did not address. You may also need to come up with money for a down payment on a new purchase, a rental security deposit, or other related expenses.
Maui Properties For Sale
How to Calculate Seller Closing Costs
You can see that the cost of selling can be significant, and some of the largest expenses are directly related to the property’s sales price. Because of this, it is crucial to speak with a real estate agent before deciding to sell your house. Your real estate agent can provide a fair market value for your home and help you determine if any repairs or improvements are necessary before listing your Maui home for sale.
Assume your home sells for $1 million. The real estate agent commissions for both brokerages will equal approximately $50,000 - $60,000. The title fees may be roughly $10,000, and the transfer fee may be $5,000.
The prorated property taxes are dependent on the annual tax bill and how long you owned the home. Assume the tax bill is $2,000, and the sale was finalized on June 30. You will owe half of the annual bill, or $1,000. However, the current balance of your mortgage escrow account will be credited to you on the closing statement. For other fees, such as the home inspection, the home warranty, the attorney’s fee, and others, you should request a quote from these providers directly.
How do I calculate my profit from selling my house?
You can calculate your net profit by subtracting the selling costs and remaining mortgage balance from the selling price. Following the example above, if your sale price is $1,000,000, your mortgage balance is $200,000, and the total closing costs are $80,000, your net proceeds would be $720,000.
Selling a House As Is
When you sell your home, it will directly compete against other listings on the market at that time. If your house is rundown or has outdated features and fixtures, home repairs may be essential before listing the property. Home improvements and repairs can enable you to more quickly and successfully get a bid from a potential buyer that is closely aligned with market conditions. However, another option is selling a house as is.
It is essential to learn how much you lose selling a house as is before you decide to forgo repairs and improvements. A home needing significant work may take longer to sell and fetch a lower sales price. In addition, a potential buyer may negotiate with you for a concession to cover the costs of some repairs in addition to offering a lower sales price.
However, there may be benefits to selling a house as is. For example, you will not have to spend time completing the repairs before listing it for sale. In addition, while some buyers may be turned off by taking on a home repair project, others may see the opportunity to design the home to their specifications. If your home does need repairs, you should obtain contractor bids upfront to determine how the repair costs will impact your bottom line at closing.
HARPTA and FIRPTA on Maui
Commonly mistaken as taxes themselves, HARPTA and FIRPTA are withholdings for non-Hawaii and non-US sellers of property in Hawaii. These withholdings are used to secure that any applicable property gains taxes are paid properly. There is often a surplus from the withholding that goes back to the seller. Learn more about HARPTA and FIRPTA.
Learn More Today
Whether you are ready to sell your house as soon as possible or simply explore the possibility, you need to have all of the facts in front of you. From understanding the costs of selling a home to walking through the process of selling a house, there are many factors that you need to understand in order to make well-informed decisions every step of the way. Learn more about selling your property on Maui today and don’t hesitate to reach out to me if you have any questions!
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Evan Harlow is a Realtor on Maui who has the expertise, experience, and work ethic to help you achieve all of your real estate buying or selling goals. We promise exceptional service and support from the beginning of the process through closing and beyond.
Posted by Evan Harlow R(S) 82003 on