Financial Preparations Before Selling Your Home (2024)

Deciding to list your home is a huge consideration that requires both a time investment as well as considerable financial preparation. Even though the home selling process can sometimes seem long and drawn out, having a solid plan and getting organized before putting your home on the market can help create a smoother transition. Below are several tips to help you make financial preparations before selling your home.

Budget For the Costs Associated with Selling Your Home

In many cases, homes are an appreciating asset meaning that when it comes time to sell, you will hopefully be making a profit. While you will most likely be making money from the sale of your home, it is important to remember that there are still some upfront costs associated with selling your home. This is why it is important to budget for these costs so you can be better prepared when you are ready to actually list your home.

Here is an overview of some of the costs to budget for with selling your home:

• Routine maintenance and repairs: Depending on the condition of your home, you might want to make home repairs or perform routine maintenance before putting it on the market. You will have to pay for these items upfront so it can be beneficial to make a checklist to track exactly how much you will be spending. Additionally, if you or your buyers have an inspection done, there will most likely be repairs that need to be made before the new buyers take ownership of the home. Having some funds set aside to make these repairs can be helpful so that you don’t have to lower the sale price as a result of the inspection.
• Real estate agent commission: In a traditional home sale, the seller is required to pay real estate commissions— this includes both the commission for the buyer’s agent as well as the listing agent. This amount is usually around 6% of the total sale price of the home.
• Utilities and services: If you purchase a home before you sell your current residence and have already moved in, you will still need to account for utilities and services at your old home. For example, you will still want to keep the utility and water bills current for potential buyers when walking through your home. Also, if you are selling during the winter, you will want to make sure that you have a snow plow contract (if you are unable to do so yourself) to ensure that you don’t have any accidents or injuries on your property while you are still an owner.
• Closing costs and fees. When you negotiate a sale agreement, the buyer might ask you to cover some of their closing costs or fees (also known as a seller concession). This is more common in a buyer’s market but it can help to financially be prepared for this type of request.

Determine the Best Price for Your Home

It may seem obvious, but one of the first steps after deciding to put your home on the market is determining the appropriate price to put on your house. Remember that there are a variety of factors that go into determining the best price for your home, so doing your research ahead of time can ensure that you have a price that will be recognized by potential buyers but does not undermine the true value of your home.

Sometimes it can be difficult to have a neutral point of view when determining a good list price because there can be an emotional attachment to the home, making it difficult to be unbiased. For example, even though you might have invested time and effort into certain customizations that you have added to your home, not all buyers will see the value in these extras.

The best approach is to take a step back and look at the main features of your home that will appear to the majority of buyers such as a good location/school district, updated kitchen and bathrooms, curb appeal, and a good flow throughout the home.

Additionally, the best price to list your home is largely dependent on whether or not you are listing in a seller’s or a buyer’s market. Researching what similar properties in your neighborhood have sold for and consulting with an experienced agent will help you get a better idea of what price to list your home to ensure that it doesn’t sit on the market too long.

Calculate Your Seller’s Net Proceeds

Performing a net proceeds calculation can help you get a better understanding of how much you can expect to make from the sale of your home. A net proceeds calculation takes into account various factors such as the estimated list price of your home minus the actual payoff value of your home, agent fees, seller concessions (if applicable), and any repairs you may need to make before you sell.

It is important to do this when selling your home to get a better idea of the best price to list at and how much wiggle room you have to negotiate when the time comes. This figure can also help dictate the total you can spend on your next residence if you are planning on purchasing a more expensive home.

Consider Having a Pre-Sale Inspection

When you purchased your home, you might have hired an inspector to brief you on the condition of the house before move-in. In many cases, the potential buyer hires a home inspector after an offer has been made and accepted. However, some sellers have found it to be beneficial to perform a pre-sale inspection to get a better idea of the condition ahead of time.

There are some benefits to having a pre-sale inspection done but this also might not be the best option for some sellers, so make sure to research the positives and negatives ahead of time.

One advantage of having a pre-sale inspection done is that it allows you to uncover potential issues with your home that buyers would have eventually found with their own inspection. This gives you the opportunity to make necessary repairs on your terms while also avoiding the risk of a potential sale falling through because of the buyer’s home inspection. However, in a competitive seller’s market, there are times when buyers will waive the home inspection altogether to have an advantage over other buyers so having a pre-sale inspection might not be necessary in this case.

Reevaluate Your Insurance Policies

When you plan on listing your home, there are plenty of items on your to-do list that make this a hectic time. Even though you might be extremely busy, it is important to remember not to overlook your insurance policies to ensure that you have a smooth transition before and after you sell your home. It is important to remember to update and reevaluate your insurance policies during this time so that you are adequately protected before, during, and after the sale.

Homeowners Insurance

Having adequate coverage during the sale of your home is extremely important to ensure that you would not face financial loss during this process. Since homeowners insurance is not transferable, you will need to secure a new policy if you are planning on purchasing a new home. It is important that your current policy protects you through closing to ensure that you are not responsible for any damage that may occur to your property before the closing date.

Additionally, if you plan on making improvements or upgrades to your home before you sell, you will want to check to see that you have enough coverage in your current homeowners’ policy. If any damage were to occur before you sell, you’d want to confirm there would not be a deficit between the amount of money that you invested in the upgrades and the cost to fix them in a potential loss.

Auto Insurance

Even though auto insurance is transferable and not directly related to the sale of your home, while you are updating your homeowners’ policy, it is worth looking into your current auto policy to see if there is any room to save. For example, if you are moving out of the area, it is important to update your address because depending on your new location, you might end up paying less for coverage.

Additionally, if you are securing a new homeowners’ policy, you might be able to reduce the costs of both your new homeowners’ policy and an automotive policy by bundling, which uses the same carrier.

Life Insurance

Selling your home is a time to reflect on your finances and ensure that you are adequately protected in any unforeseen circ*mstance. This is why it is a good time to also look into your current life insurance policy or research options to secure a policy if you do not have one yet.

The sole purpose of term life insurance is to ensure that your family would remain protected if you were to pass away. As a homeowner, it is especially important to secure some kind of insurance coverage to protect your family as well as your assets from any unanticipated situation.

Life insurance can be overlooked, especially during the home buying process when there are so many other distractions and items on your to-do list. With that said, it’s a critical time to start protecting your assets and make a plan for the future, as this is such a large investment.

Depending on your next step after selling, you might be planning to upgrade to a home that has a higher value or payment than your current residence. This is another reason why it is important to make sure that your current life insurance policy would provide your family with enough protection to cover the cost of your home and the monthly obligations associated with your investment should you not be there to manage the payments.

Stage Your Home

Depending on the type of market you plan on listing your home in, staging your home can give you an advantage over other sellers. Staging is the process of decorating your home to showcase its best features and attract potential buyers. Even though staging your home can be an added upfront cost, it can be worth the investment to help sell your home quicker.

Staging your home can help attract potential buyers because it helps them take mental ownership of your home. Not only do you show that your house is well-maintained but it can disguise minor flaws because the buyer won’t be walking into a completely empty room during their showing.

Organize Your Paperwork

During the home buying process, you might remember all of the paperwork associated with securing your home. When the time comes to sell, you will also have a multitude of paperwork and files to prepare ahead of closing. Getting organized with files and paperwork needed to sell your home can help make for a more seamless transition. Some items to gather before listing your home can include water and utility bills, maintenance records, any applicable warranties, appliance manuals, tax records, and mortgage statements.

Additionally, you could consider obtaining a copy of your home’s survey to provide a more comprehensive picture of the property and eliminate any surprises that may arise when the home is under contract. For example, sometimes the property can have discrepancies over the boundary so having the survey ahead of time can clear up any confusion potential buyers may have.

Perform Routine Home Maintenance, Updates, and Repairs

When you decide to list your house, it can be beneficial to complete all routine home maintenance, updates, and repairs ahead of time. This is a good time to replace your air filters, check the batteries in your smoke and carbon monoxide alarms, mow the lawn, weed whack, and take the time to fix items such as leaky faucets or creaking doors. This allows buyers to concentrate on the larger picture and not fixate on small cosmetic details that can be easily repaired.

When making the decision to list your home, there are both emotional and financial considerations involved. As a seller, it is important to understand that even though you might be profiting from the sale of your home, there is still a substantial amount of financial preparation during this time. Getting organized and having a solid plan can help you smoothly transition into the next chapter of your life.

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Key Financial Preparations Before Selling Your Home