Home Sale Proceeds Calculator
Today someone asked me how to make sure buying a property is a good decision for your money. When my husband Josh and I bought a property in Brooklyn, we used this home sale proceeds calculator that a very good friend of mine uses to analyze his property investments. He says you should always know how much profit you will make when you sell the property you buy.
Here, when you enter your data (highlighted in green) it returns to you the profit that you expect to make when you sell and your annual return of investment.
You can access it clicking here or on the image. Enjoy it and have fun!
And if you want to learn more about the home sale proceeds calculator, read on. The following information will give you a detailed understanding of what it’s for and how to use it.
How much profit can you make from selling the house you are planning to buy?
Are you a home buyer looking to build home equity as part of your long term financial plan? Or are you planning to buy a starter home with the intention of buying a bigger place? Whatever your purpose may be, it’s useful to think like a house flipper. And, it would be handy to have a home sale proceeds calculator to know how much profit you can make when you sell your home.
Home buyer to home seller mindset
When it comes to buying a home, you should always have the mindset of a home seller. Always think long term and in terms of potential returns on investment when you’re planning to buy a home. Doing this can make you more confident in buying a home and reassures you, as a first time home buyer, that you’re making the right decision.
Buying a home may be heavy on the pocket but it comes with several benefits. You have the full freedom to use the property as you want as the home owner. You may also be eligible for tax breaks and your home equity may serve as your nest egg.
Getting familiar with a home sale proceeds calculator
Buying a home and knowing what it means for you financially gives you assurance in making the investment. The best way to assess the value of a potential home is to put yourself in the shoes of a home seller.
Putting yourself in the shoes of a home seller will give you a better idea of the value of a home. In this case, you need to compute your home sale proceeds or how much funds you’ll have left after selling your home and paying off the expenses you could possibly incur in the process. Doing this helps you decide if a home is worth investing in. To make the process easier, you can use a home sale proceeds calculator.
A home sale proceeds calculator is a tool that helps you compute how much profit you can make if you sell your home. With this calculator, you just need to input the home’s sale price and the costs entailed in putting your home up for sale.
Your home sale proceeds will depend on factors such as your mortgage balance and closing costs. It would be useful to get familiar with the possible expenses you can incur and we will give you an overview of these expenses in the next section.
Factors to consider when calculating home sale proceeds
When using a home sale proceeds calculator, you need to factor in the home sale price, mortgage payoff amount or mortgage balance (if applicable), and closing costs.
Here’s a quick overview of the usual items that a home sale proceeds calculator will ask you to input and what they mean.
Home Sale Price
Home sale price refers to how much your home could sell for. Determining the right price for your home is crucial in closing a sale. Pricing too high could make your home unsaleable and an exceedingly low price may lead to losses on your part.
The price of your home should also be based on the current price of similar properties in your area. Aside from that, you should consider prices from past sales and the market value of neighboring homes to determine a reasonable price estimate. When you find the most reasonable price for selling the home, you can input in the amount in your home sale proceeds calculator.
Mortgage Payoff Amount
If you’re selling a home with a mortgage, here are some of your options:
1. Pay off the mortgage using the proceeds from the sale. The mortgage payoff amount is your outstanding mortgage or the total amount that you need to pay off to settle everything that you still owe your mortgage lender.
2. Allow the buyer to assume the mortgage. This means that the buyer will take over your outstanding mortgage and pay the remaining balance. This transaction will require the approval of your lender.
When you sell a mortgaged home, you need to do make a decision between those options to transfer the title of the property to the buyer.
Note: Some lenders charge a prepayment penalty for paying off your loan before the end of the mortgage term. This penalty can be a flat fee or a percentage, usually 2 to 4 percent, of the remaining loan balance. Other lenders use a sliding scale fee where the prepayment penalty decreases over the years. For instance, the penalty maybe 4% in the first year but decreases to 3.5% on your mortgage’s third anniversary.
Closing costs refer to the fees and other expenses needed to close a sale. Here are some of the most common expenses you may incur when you settle a real estate transaction.
Real Estate Agent Fees
Real estate agent fee refers to the commission given to real estate agents involved in the process of selling your home. This expense accounts for the biggest chunk of the expenses you’ll incur in selling a home. The real estate commission is usually around 5% to 6% of the home sale price. For a $350,000 home, for instance, you need to pay around $17,500 to $21,000, which is split evenly between the buyer’s and the seller’s agents.
This cost covers the fees incurred by agents while doing the legwork and assisting with the paperwork to sell the property. This fee includes expenses for taking photos of your home, updating your listing, and arranging tours and open houses. If you sell your property as for sale by owner, you can skip this expense. However, a real estate agent can save you time and effort when selling your home.
Home Ownership and Overlap Cost
Home ownership and overlap cost are the expenses you incur when you’re selling your property while moving to a new home or paying for a short-term rental. It’s more convenient to allot 1% of the sale price to cover the expenses you incur during this transition period.
This cost will also cover expenses for two homes at the same time. These expenses may include your mortgage installments, utility costs, homeowner’s association fees, homeowner’s insurance, and property taxes.
Staging and Preparation Cost
You need to make sure that your property is attractive and presentable to attract potential buyers. Staging a home is all about enhancing your home’s best features. Depending on the condition of your home, staging and preparation expenses would cost you from $1,000 to $8,600.
Staging and preparation cost varies depending on the size of your home, the length of time the property has been on the market, and the amount of work required. This expense could include cleaning, repairing, landscaping, painting, your home. You have to allocate a certain amount for this expense. Choose the most realistic estimate and input the amount in your home sale proceeds calculator to compute for net profit.
Seller concessions pertain to closing costs that the seller agrees to pay on behalf of the buyer. This serves as an incentive to make a property more attractive to buyers and to make it more likely for the seller to close the deal.
Depending on the location of the property and the buyer’s down payment, this expense can range from 1.5% up to 2% of the sale price. As the seller, you may pay expenses such as the attorney fees, loan processing fees, and inspection fees.
Transfer Taxes and Other Settlement Fees
You also have to account for transfer taxes and other sales settlement fees when computing your home sale proceeds. Most states charge transfer taxes between 1% up to 3% of the sale price. Check how much the transfer taxes would cost you in your state and input the actual amount in your home sale proceeds calculator.
The settlement fees, on the other hand, cover the accounting, legal, and other expenses related to preparing the contract. The seller also covers payment on the owner’s title insurance premium and other miscellaneous fees related to the transaction.
How to Calculate for Home Sale Proceeds
If you have never tried using a home sale proceeds calculator, don’t worry, the process is straightforward. All you need to do is enter all applicable expenses required to sell your home.
1. First, gather all the information related to selling your home including the home sale price, mortgage payoff amount id just need to fill up the home sale price or the reasonable and fair market price of the home you wish to sell.
2. Next, input the sales price and the costs you’ll incur in the relevant fields in your home sale proceeds calculator.
3. If you plan to pay off the mortgage when you sell the home, input the mortgage payout amount.
4. Finally, push the calculate button to compute your sales proceeds. If you are using a spreadsheet calculator, the relevant fields should be updated once you input the values.
After doing these steps, you should figure out your estimated net profit on the sale of the property. Here are some home sale proceeds calculators you can use to find your estimated profit.
In Redfin’s Home Sale Proceeds Calculator, you just need to input the home sale price, outstanding mortgage, and the general location of your property. While Redfin has a low margin of error in providing estimates, don’t forget to check for the estimated value of the property through other websites.
Zillow helps you determine how much your home is worth by simply entering the property’s address. With just a few clicks, you can figure out how much the home is worth but these values may not be always accurate.
If you prefer spreadsheets that you can personalize and access at will, try Home Flow’s home sale proceeds calculator. With a spreadsheet calculator, you have full freedom in choosing the price of the property and in adding expenses.
Estimating the value of your Home
Owning your home allows you to build wealth through your home equity. If you make the right purchase, you can even sell the property at a profit in the future. Owning your home provides you with the freedom to build your dream home. It may help you save you money on taxes and take advantage of other benefits.
Knowing the amount of profit from the sale of your home empowers you to make informed decisions. With some help from a home sale proceeds calculator and a bit of research, you’ll be more confident about choosing the home to buy. And this extra step could be something that you’ll thank yourself for in the long run.