Q: We recently put our house on the market, but had to take it back off because we were given incorrect information from our Realtor.
We were under the impression (according to her) that we would be able to close on the sale of our current home and the purchase of our new home on the same day. We were expecting to use the extra money from the house we were buying to help pay her commission and the taxes on the home we were selling.
We found out that was incorrect the day we went to sign papers on the contract on the home we were selling. The offer on our house was only $500 more than what we owed.
Are there any options for obtaining funds to pay for closing costs on the seller’s end? We are preapproved for 100% financing on the purchase of another home.
Also, how much is the market analysis taken into consideration? Our home appraised for $37,000 more than the agent’s market analysis.
Any help would be appreciated.
A: There are so many missing and confusing pieces of information in your email that it’s difficult to provide you with clear advice.
First, if you’ve lived in your home for two of the last five years, there is no capital gains tax due on the proceeds. However, your city, county and state may require transfer taxes, which are taxes based on the sales price of the house. Sometimes they cost as much as $1 per $1,000 of sales price. Of course, if you’re selling your home for just $500 more than you owe, there will be no cash coming to you, but, rather, you will have to come to the closing with money.
As for the commission, you would typically pay that out of the closing proceeds from the sale of the property. If your property is worth $200,000, and the commission is 5 percent, then you would owe the real estate agent $10,000 on the sale of the property. If there is a buyer’s agent involved, your agent would share the commission with the buyer’s agent.
However, if you owe $195,000 on your mortgage, and you are offered $195,500 for your property, then to close, you would have to come up with the cash for the commission, transfer taxes, survey, title insurance and other seller fees out of your savings.
While you’re not technically “upside down” on the sale (which means you owe the bank more than the house is worth), it’s going to cost you probably more than $10,000 in cash to close. I don’t know of anyone who will give you or lend you the cash you need to close on this transaction.
I’m confused by the idea that your agent did a market analysis but you also had an appraisal. Typically, you wouldn’t pay for an appraisal — the buyer would pay for an appraisal as part of getting a loan for your property.
But if the appraisal came back at $37,000 more than the sales price, there are a couple of explanations: the property is worth more than you’re selling it for (and the buyer’s are getting a great deal) or the appraiser has incorrectly appraised the property or faked the appraisal in order to assist the buyers with their financing.
It sounds to me as though you don’t really know what your property is worth. Your agent has either done a lousy job of explaining what is going on in the neighborhood, or you haven’t listened very well. Perhaps this is why you have some unanswered questions about the transaction.
Right now, you should talk to several other well-regarded real estate agents from different firms who work frequently in your neighborhood. Try to get a sense of what other homes that are similar to yours are selling for in your neighborhood.
The bottom line is if you recently purchased your home and the home hasn’t appreciated in value, you will need to pay money to sell the home.
If the home has appreciated in value and you took out new loans and spent the money, your time to settle up will have come. If you become informed about the market place and understand what homes are selling for, you can only hope that you are able to sell the home for enough money to avoid having to put money into the deal to get the home sold.
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