9 Things Besides Realtor Commission That Affect Your Net Proceeds from a Property Sale

Selling a property can seem financially straightforward at first glance.

However, the final amount that you actually get wired to you at the closing table – known as the net proceeds – can be affected by a bunch of different factors.

So many homeowners get hung up in the commission they're paying and fail to realize all of the other things that can affect how much they walk away with at the closing table.

A great agent will have the relationships necessary to help you minimize additional fees, negotiate aggressively on your behalf and maximize your net proceeds.

Understanding these can help you set realistic expectations and make informed decisions.

1. Legal Liabilities Like Child Support and IRS Judgments

Outstanding legal financial obligations, such as child support arrears or IRS judgments, can lead to liens against your property.

These liens must be satisfied from the sale proceeds before you receive your share. This ensures that legal obligations are fulfilled as part of the property transfer process.

2. Unsettled Accounts Like Contractor or Attorney Liens

Unpaid bills for work done on your property, whether for construction, renovation, or legal services, can result in liens. These are legal claims against the property for unpaid debts and must be cleared during the sale, reducing your net proceeds.

Attorney liens seems to be most common in our divorce cases -- where the attorney fees are paid from the proceeds of the sale.

When we work with high stakes transactions like divorce and probate, we always pull a preliminary title report at the beginning to ensure there will be no surprises when it comes time to distribute funds.

3. Taxes

Capital gains tax may apply if your property’s selling price is significantly higher than the purchase price. Additionally, any delinquent property taxes will be settled from the sale proceeds.

4. Open Permit Violations

Unresolved permit issues or building code violations can result in fines or require you to undertake repair work before the sale. These costs directly reduce the net amount you receive.

During one of my transactions, we had a seller who came to us with $16,000 in open violation fees that was growing $75/day from a fence that was improperly installed.

We enlisted the help of our permit expediting company to negotiate the fees down from the city. In the end, our seller only had to pay $2600 of the $16,000 in fees.

5. Association Assessments and Fees

If your property is part of an association, any unpaid dues or special assessments need to be cleared, which can eat into your net proceeds.

While some association assessments will transfer to the buyer, you may find some associations who will not grant the new buyer's approval unless the seller agrees to pay off the entire assessment at closing. This isn't a typical practice but we have seen some associations push for this.

6. Secured Loans Against The Property

There are several types of loans that can be secured against a property and it's easy to let those pile up.

Them most common type of loans have to do with financing the property - this includes mortgages, HELOCs and reverse mortgages. These will all need to be paid off at closing to transfer clear title and will eat into your profits.

The second most common are loans for things like roof and impact windows. The PACE program is a great example here.

We also see down payment assistance loans - where the homeowner used a 0% interest loan as down payment assistance when they bought the property that only gets paid off at closing.

You may also find that some business loans (like SBA loans) will also be secured by the property. You can reach out to the lender directly to see if there's anything you need to consider while selling a property that has loans collateralized against it.

7. Closing Costs

Sellers are often responsible for various closing costs, which can include title insurance, escrow fees, notary fees, and transfer taxes. These costs vary by location and transaction details.

Typically though, you can expect to pay around 1% of the sales price towards closing costs.

8. Repair and Renovation Costs

Costs for repairs or renovations requested by the buyer during the negotiation process will also impact your net proceeds. These could range from minor fixes to significant refurbishments.

When we negotiate a contract, we do everything we can to minimize what the buyer can ask for.

Typically, if the property has a material defect that may affect the value of the property or it's insurability, we will end up giving a small credit towards the buyer's closing costs to repair it.

That would include things like substantial roof issues, structural issues, A/C issues and plumbing/electrical issues.

This is also done on a case-by-case basis.

For example, if it's an older property that hasn't had the kitchen updated, one of the things that will show up on the inspection report is that the GFCI outlets are missing (you know, those little outlets that are usually by sinks in the bathroom and kitchen with the little red button) but we won't give a credit for that.

On the other hand, if there's an active roof leak or if the buyer can't get insurance because of the type of plumbing, we'll give a buyer a credit towards repairs.

9. Seller Concessions

In some sales, sellers agree to concessions to entice buyers, such as paying a portion of the closing costs. While these can expedite the sale, they also reduce your net proceeds.

A Word On Commission

While it's true that there are many agents who will put a property on the market and do absolutely no marketing, those agents are typically one of the 50% of agents who did 0-1 transactions last year.

High producing real estate agents have a specific action plan to maximize exposure - and that comes with expenses. When we take a listing, we don't negotiate on commission because our track record shows we actually net our sellers more than the market average.

That means even though you may find an agent who will do it for less, you will likely still end up netting less money because they will sell your house for less.

Conclusion

While the gross sale price of a property might seem promising, a variety of deductions ranging from legal obligations to repair costs can significantly affect your net proceeds. Being aware of these factors helps in accurately estimating the net amount you'll receive and planning accordingly for your next financial move.