Calculating Your Net Proceeds

You’re thinking about selling your house, but you don’t have to.  Maybe, if you stand to make enough money from the sale, you’ll consider moving forward with it. …Or… Life happens and you’re forced to sell your home.  How much money do you stand to walk away with?  Or, in a less than desirable situation, how much money will you potentially lose? Regardless of what your situation is, if you’re thinking about selling your home, it’s important to know the financial outcome … you need to calculate your bottom line and figure out what the net proceeds are going to be from the sale.  Actually, let me rephrase that – you don’t necessarily need to calculate your net proceeds, but your agent had better!  At SPARRproperties, we run these numbers for our home sellers multiple times throughout the process of successfully getting their house sold.  We do it in the very beginning before we even put the house on the market – this gives the seller a ballpark idea of what to expect.  Then, as offers start to roll in, we do it again based on the price and terms of each offer – this allows the seller to easily and accurately compare the different offers against one-another.  We remove all of the guess work and uncertainty – our home sellers know exactly what they stand to pocket at the end of the sale. How do we do it?  Well, we work through the following areas to make sure we understand who’s paying what and for how much:

Encumbrances (Existing Liens)

Most home owners don’t own their property free-and-clear.  They have one or more loans, credit lines, bonds or other liens on the property.  Make sure you have a list of the current balance of each individual encumbrance and, in the case of it being a loan, know the interest rate as well.

Charges by Existing Lien Holders

Paying off a loan isn’t as simple as just paying the remaining balance of the principal.  Interest will have accumulated from the 1st of the month to the day the sale closes … there may be prepayment penalties built into the loan agreement … demand and reconveyance fees … wire transfer fees, courier fees, etc.  Do your best to account for all of these potential fees.  Some may be unknown right now, and that’s fine – try your best to make an educated guess as to what it will cost.

Title and Escrow Charges

Escrow and title charges, in Walnut Creek and Contra Costa County, are typically paid for by the buyer of the property.  However, every deal can be different and it’s possible that the buyer has tried to negotiate that you, as the seller, will be responsible for paying part or all of these costs.  If that’s the case, you’re going to need to get estimates on what these charges will be.  The fees are generally based on the purchase price of the property as well as the size of the loan the buyer is getting. If you’re trying to pull these numbers together on your own, I’d recommend taking a look at Chicago Title’s schedule of fees – it’ll put you in the right ballpark for your estimates.

Other Expenses and Prorations

Here’s where we get into murky waters.  Every aspect of a real estate deal can be negotiated, so, until you have an offer from a buyer, the best you can do is put together a list of expenses based on the common practice in your market.  You’re going to be interested in putting numbers to the following items:
  • the Brokerage fee – how much are you paying your agent’s broker for the sale and how much are they providing to the broker of the agent that represents the buyer?
  • is there a County transfer tax?
  • is there a City transfer tax?
  • as the property taxes are prorated, are you required to pay the buyer?
  • do Homeowners dues need to be prorated?
  • are you paying any of the Buyer’s closing costs?
  • are you paying for a Natural Hazard Disclosure and/or any other reports?
  • are you paying for a Wood Destroying Pest and/or any other inspections?
  • are you paying for any corrective work or other repairs?
  • are you paying for a home warranty program for the buyer?
  • do you need to pay any rent or security deposit back to the buyer in the case you won’t be vacating the property immediately?
  • are you paying for any VA or FHA discount points or fees for the buyer?
  • are you paying for any HOA transfer or move-out fees?
  • has the buyer requested you to pay for anything not on this list?

Estimated Credits

The two most common reasons a seller would receive a credit from the buyer are: 1) prorated property taxes and 2) prorated HOA dues.  But, as we mentioned earlier, everything in real estate can be negotiated … if you or the buyer negotiated in a seller credit for some other reason, congrats and be sure you account for it here!

Proceeds Recap

OK, now that you’ve got a handle on all of the expenses, you’re ready do your final calculations:
  1. Take the Purchase Price and subtract the Total Encumbrances you calculated in the very first step above.
  2. From this number, subtract the Charges by Existing Lien Holders, the Title and Escrow Charges,  and the Other Expenses and Prorations
  3. Now, add in the Estimated Credits
What you’re left with is the estimated seller proceeds from this sale! If you want to take this one step further, you should also consider whether or not you will be offering seller financing or need to withhold any amount for Federal or State taxes.  If you are or do, these amounts would be subtracted from your estimated seller proceeds number … and, you’d be left with an estimated seller cash proceeds from this sale. Are the proceeds what you were expecting or hoping?  Ready to put your house on the market?  Give me a call (925-817-8428) and we’ll get the ball rolling!

Why Work With the SPARRproperties Group?
Arek P. recommends Walnut Creek Home Buyers Choose Brian Sparr
We easily went through 12 agents before running into Brian. Brian immediately stood out from the pack – he is extremely knowledgeable, smart, and real estate is his passion – which is an important distinction and an absolute necessity for a great agent.
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Jenny K. recommends Concord Home Sellers Choose Brian Sparr
Brian is hard-working, ethical, timely, savvy, confident yet modest, knows the in’s and out’s of the current market, and a really nice guy on top of it all. If you have any doubt, at least meet with him!
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Dennis H. recommends East Bay Real Estate Investors Choose Brian Sparr
I do not think I have worked with anyone in ANY business that demonstrates the kind of dedication, integrity and diligence of Brian Sparr. I would never again work with another realtor and would recommend Brian Sparr to anyone without hesitation.
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Alan M. recommends Out-of-State Real Estate Investors Choose Brian Sparr
Brian’s been an incredible advisor, setting expectations for short sale & foreclosure opportunities, educating me on commercial property financial modeling, and going beyond the number crunching...
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