So we sold our house. This was the first house I’ve owned and thus the first I’ve sold so I didn’t know going into it how everything would work. Ultimately it turned out amazingly well, better in fact than I’d expected. A lot of my uncertainties were about money, so I thought I’d describe the sale from that standpoint.
The short story is we sold it for 453K and deposited 150K in our checking account when it was all over. The longer story goes like this…
We bought our house new for about $290,000 in 2003. We put about 10% down ($29,000 or so) and paid the minimum monthly payments. We refinanced once and took out a $30,000 line of credit to pay for Trail’s College degree. Ultimately we borrowed nearly 290K. As we sold our house the debt tally stood at $27,000 on the second mortgage and $232,000 on the primary for a total just a bit shy of $260,000. Thus in 13 years we only managed to decrease our debt on the house by about $30,000. Not what I’d call too impressive I’m sorry to say.
Keep in mind that on home loans early payments are almost entirely interest. The amount of principal you pay slowly rises over time. When you refinance you essentially take out a new loan so whatever progress you’d made gets re-set and you are back to paying almost entirely interest on your payments. It’s one of the hidden costs of a re-finance, the other being the fees you spend in the process. That doesn’t mean they all bad, just not very good for building equity.
When you sell a house determining a sell price is one of the key decisions. A recent property tax assessment put our house at $395,000. Zillow.com was estimating it at $462,000 using their “Zestimate” algorithm. Our real estate agents were thinking around $425,000 based on what they had seen in nearby homes of a similar size. Clearly there is a lot of wiggle room here and ultimately it’s worth whatever you manage to sell it for. The agents wanted to take a price low strategy to pull in competing buyers and thought $415,000 would be best. Not one to second guess the experts I hire I went with what they suggested as the listing price.
Speaking of agents, they are one of your bigger expenses. Mine cost me 6% of the sale price. Based on my research this was on the high end of normal and they seemed to offer pretty deluxe service so it seemed fair. It is actually hard to find a list of what you “should” pay an agent as a seller. They are prohibited from listing their price or discussing it to stop collusion in the market. It is something that can be negotiated but I don’t generally dicker over what seems to me a fair price. In my case the agents were paying people to clean and stage the home so they were passing on a good bit of their pay to others as well.
We did spend some money fixing up our house based on recommendations from our agents; focusing on what would deliver the biggest returns. Painting was at the top of their list, both inside and out. Due to painters being very difficult/expensive to hire during a housing boom, we decided to paint the inside our-self, and make due with a good power washing outside. We also had some doors to replace, water damage to the outside of our front porch, and some issues with our fence that needed to be seen to. Finally there was a bedroom we’d transformed into a workshop, complete with linoleum flooring that the agents recommended we transform back into a bedroom. After some consideration we decided to have the entire downstairs carpet replaced since matching the work room might be tricky and the old carpet wasn’t looking to hot anyhow. All in all we spent around $3,500 for the repairs and improvements.
After a ton of work we’d cleared out our house and gotten it very shiny indeed for its debut on the market. We held it open for one week at which time we would consider the offers that came in. All told we had 9 offers on the house. The stronger offers all had contingencies to bid up from the asking price against other offers. So if someone else was offering more they would bid up by a given amount until they reach some specified maximum value. The best offer of the bunch was by all accounts incredibly good. It was cash, with no conditions, included a pre-inspection they paid for, closed in one week, and was contingent up to $475,000. Since the next best was contingent to $450,000 we made a counteroffer at $453,000 and they accepted. Our real estate agent described this as about the best terms on an offer they had ever seen. Huzza!
A week later and we closed, meaning everyone got paid. And here is where I ran into a surprise or two. I’d done some tax research on selling the home and as it was my primary residence, I was married and the home was under $500,000 there would be no federal capital gains taxes. What there was, and I missed in my research, were county taxes. The county excise tax was $8,000 and the King county treasurer took another $2,300 . The title company fee was also separate and came to around $900.
So, for those playing along, we spent around $28,000 to sell our house to various parties taking a slice of the action which is pretty close to the amount of equity we’d built in the place. That means the profit we did realize was almost entirely from the appreciation in value of the home. All the money paid in mortgage over 13 years pretty much amounted to rent in that sense though it was invested in the sense it later let us realize the increase in real estate value. If we had been buying another house and moving out stuff, we’d likely spend even more, as it was we sold most of our belongings which covered some of the up front costs for us.
No doubt if I was better with my money I could have made it all work out a little richer, but I have no regrets. It will buy me my new home free and clear and pay for more than a year’s living expenses on the road. Not a bad start for a new life of travel and adventure!