How To Calculate Net Proceeds from Home Sale

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

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If you’re thinking of selling your home, you’re probably wondering how much you’ll put in your pocket. Unfortunately, you may not know precisely the amount of money you’ll make after selling your house until you put a contract on your home. 

However, you may get a hint beforehand once you set a price for your home sale. A home’s original asking price determines how long it will take to close a sale and how much you’ll eventually make.

Other factors that affect net proceeds from a home sale include the mortgage you still owe on your home and whether you’re working with a realtor to sell your house. Here’s a closer look at what net proceeds are and how you can calculate them. 

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What Are Net Proceeds on a Home Sale?

Net proceeds are exactly how much you’ll make after selling your home. In most cases, this amount is typically lower than your home’s value and even your asking price. 

To figure out your gross proceeds from a home sale, you need to take into account your outstanding mortgage balance, real estate commissions, property taxes, and any other fees. Plus, if you have a second mortgage or a home equity loan, you’ll need to pay off the balance before selling the house.

The goal of every home seller is to take home a significant amount of money possible. Therefore, having an idea of your net proceeds before listing your home is crucial. In addition, it will help you budget your spending for your new home. Whether you’re going to use the proceeds as a down payment or for home improvements, it’s a good idea to know your estimated net proceeds.

How To Calculate Net Proceeds from Home Sale

Here’s a step-by-step guide that will help you calculate your gross proceeds from a home sale.

Start with An Estimate (Market Price and Remaining Mortgage)

Pricing your home correctly is the most crucial step in the home selling process. You don’t want to overprice or underestimate the asking price of your home. First, look at every house that’s comparable to yours and has been listed in your neighborhood over the past three or six months. 

When pulling comparing listings, here are some of the things you need to look at:

  • They should be in the same neighborhood
  • Compare similar ages
  • Similar square footage
  • Roughly the same number of beds or baths
  • Similar condition

Finally, compare the original list price of the homes to the final price to evaluate any variations. The final sales price of a recently-sold home with similar comp listings as yours is an excellent place to start your estimate.

Take Into Account Prep and Repair Costs

Many factors go into calculating net proceeds from a home sale. There are additional expenses that can impact the amount you get after the sale is complete. You need to factor in the following extra costs:

  • Repair costs: If you plan to make any repairs or home improvements to boost the value of your home, you need to take into account such costs.
  • Cost of staging the home for sale: Whether it is hiring cleaning services to do a deep cleaning or replacing appliances so they look new, staging your home comes at an extra cost.  
  • Real estate agent fees: If you work with a real estate agent to sell your house, you’ll need to pay a commission, which varies by agent.
  • Closing costs: To complete a real estate transaction, you may incur closing costs like origination fees, title insurance, and transfer tax.

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Determine Seller Concessions

When buying a home, you pay closing costs. In some cases, the seller may help pay part of these closing costs to reduce the amount of money the buyer needs to close the sale. These are called seller concessions, which should be subtracted from the sale price.

Seller concessions are basically closing costs that you, the seller, agree to pay. Buyers might ask for seller concessions if they think the house is overpriced or have a problem covering closing costs. Since there are several closing costs, you ( the seller) can willingly cover any of the following: 

  • Property taxes
  • Origination fees
  • Title insurance
  • Appraisal fee
  • Inspection fees
  • Attorney fees

Calculate Transaction Costs 

There’s no such thing as free lunch holds true in the real estate market. As a home seller, you’re on the hook for various transaction costs, starting with real estate agent fees. A real estate agent is paid a commission based on the home’s sales price. Typical real estate commission fees range anywhere between 5% and 6% nationwide.

Apart from agent commissions, you’ll likely be responsible for other transaction costs, such as closing costs. These are expenses above the property’s price that the buyer and the seller typically incur to complete a real estate translation. For example, closing costs can include title insurance, loan origination fees, and taxes. 

Calculate Holding Costs 

Finally, you need to consider the holding costs of the house you plan to sell. Putting up your home for sale doesn’t mean you won’t incur any other expenses. As long as you hold on to the property while waiting to sell, you’ll need to pay holding costs. 

The most common holding cost is a mortgage. How long you hold the property determines the overall holding costs. Beyond mortgage, you’ll also cover other expenses, such as utilities and Homeowners Association (HOA) fees. A speedy sale will undoubtedly reduce the holding costs.

Calculate Total Proceeds

You can calculate your net proceeds by factoring in the estimated asking price, repair costs, seller concessions, and holding costs. To calculate net proceeds from a home sale, you subtract all the selling costs from your home’s selling price.

For example, let’s say:

  • The estimated price of your home is $370,000
  • Repair costs of $15,000
  • You agree to cover $5,000 of the closing costs
  • Have an outstanding mortgage balance of $140,000

Your net proceeds will be $370,000 – ($15,000+$5,000+$140,000)= $210,000

However, the amounts can change depending on many factors, like your local housing market and how much real estate agents charge in your area.

Ways to Sell Your House and How They May Affect Net Proceeds

How you sell your house determines the amount of proceeds you’ll get after completing a real estate transaction. Here are three ways to sell a home and how they impact your gross proceeds.

Cash Buyers

A cash buyer is someone who purchases a property outright with cash on hand, meaning they don’t need to take a loan or mortgage. Selling a home for cash can save you thousands on closing costs, reducing your gross proceeds.

Realtors 

A realtor is a real estate professional licensed by the National Association of Realtors (NAR). Working with a realtor will not only bring value to your transaction but also do the heavy lifting for you. Plus, realtors have a better understanding of the real estate market, and you don’t have anything to lose until your home sells.

iBuyers

iBuyers, also referred to as instant buyers, are companies that use technology to price your home immediately. Working with iBuyers like Offerpad can speed up your home sale and save you a lot of money on closing costs. Offerpad has two offerings: the Express solution, where you receive an offer within 24 hours, and the Flex solution, with a cash offer as you test the open market.

Are you looking for a hassle-free way to sell your house quickly? Request an offer from Offerpad for an Express or Flex solution.

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