If you sell your home for more than you owe on your mortgage, surely you get cut a (hopefully fat) check for the difference, right? Well, the answer to that one is a big “we’ll see.” Little do you know if you haven’t been in this situation before, but sellers have a lot of people and fees that need paying when they come to the closing table. All these debts have to be paid before you can see any profit - if you even do at all!
Here’s how the money moves around after the sale: a go-between between buyer and
seller, who could be an escrow company, a real estate agent or attorney, or a title company, handles the transfer of the check from the buyer’s lender, which is used to pay off the seller’s mortgage. But, as you’ve already learned, the balance left over doesn’t go straight into your checking account.
On the top of the “pay me” list are the real estate agents who handled the house purchase and sale. If you used a pro to sell your house, you have to pay their commission out of the home’s proceeds. If the buyer also used an agent, that commission is split between the two realtors. The commission for a home sale is usually five or six percent of the purchase price, and you will know exactly what it is for your situation because it will be spelled out for you in the listing agreement. The go-between, previously mentioned, will cut a check to the agent or agents. Should there not be enough money after the home sale, you will have to get your own checkbook out and pay the balance yourself.
Then there are closing costs. While it’s true that these costs are typically incurred by buyers, sellers have their share of closing costs that must be deducted from the purchase proceeds. These fees total about one to three percent of the purchase price, and generally include recording fees, title insurance premiums, and other such necessities. You will also have to pay the year’s taxes on the house. Most homes’ taxes are paid in arrears, which means that the taxes you paid in 2019 were actually meant to cover 2018. You will have to bring the taxes up to date before you can say goodbye to the house.
Finally, if there is any money left after dealing with all those payments - then and only then - you will see a check for your profit on the house. Congratulations!
