You’re Probably Not Saving Enough to Buy a Home — Here’s How Much It Cost Me
I knew I had to save up a bunch of money to buy my first home. I played the long game and bartended at night and on the weekends to squirrel away a 20% down payment while also working a full-time job as a newspaper reporter. But what surprised me, as a first-time seller, is how much money I needed to have stashed away when it came time to sell my home.
Thankfully, I had been in my house for a decade, so I had built up a significant amount of equity and could replenish my savings account after the sale of my house was complete.
But because that equity wasn’t liquid before I listed my home, I did have to tap into my savings to cover a number of projects. I also had to avoid putting any big charges on my credit card because I was in the process of getting an approval for the mortgage on my new home, and I didn’t want to tip my debt-to-income ratio out of balance. (Mortgage lenders are sticklers about this and caution against making any big purchases between the time you’re preapproved for a home loan up until you close on a new mortgage.)
In total, I spent about $20,000 to prepare my home for sale. This was not unexpected — I did have to pay Realtor fees, after all. But I had to spend on other stuff, too. Financial experts I talked with say you should budget between 2% and 5% of the sale of your home for repairs. I listed my home at $500,000, so the $20,000 I spent before I put it on the market was right in that range. These costs can skew higher if you have deferred maintenance.
I also paid my real estate agent about $13,000 in our real estate transaction — however, this was not a surprise, nor part of the $20,000 spend. That’s because I signed a contract prior to the sale agreeing to pay him 2.8% of the sale, and that cost came out at the end during closing — so it’s not something I had to save for or pay out of pocket.
The money I spent or paid out largely fell into three buckets — the aforementioned expected real estate fees, appliance upgrades, and minor replacements and upgrades. Here’s how it all broke down.
Appliance Repairs
Several of my appliances were reaching the end of their life cycles, so, to be fair, many of these line items would have been costs I would have incurred if I stayed in my home, too — but probably spread out over a longer period of time.
The biggest ticket item was a new HVAC unit, which cost about $13,500, followed by a new water heater, which cost $3,500 with installation. I also replaced my refrigerator, but saved some money by buying it from a scratch-and-dent store, so I only had to pay $1,900. I got a high-end Bosch refrigerator for about 50% off because it had a small dent on the lower part of the freezer drawer. I figured that having new appliances would help me breeze through the inspection process and also help my home sell for as much as possible.
The best-case scenario is if you’re able to cover these expenses out of pocket. But if you don’t have the cash on hand, and you don’t want to rack up a bunch of credit card debt, you could potentially negotiate repair costs with the buyer, says Andrew Crowell, financial adviser and vice chairman of wealth management at D.A. Davidson.
Total cost: $18,900
Minor Repairs
Some other expenses I incurred ahead of selling my home included fresh coats of paint for $600 (I hired a painter to access some high walls surrounding my staircase), replacing some kitchen tiles that were chipped for $150, having my carpets professionally cleaned, for $250 and paying a handyman to complete a number of odd jobs for $400.
My real estate agent picked up the tab on some of my home-selling expenses, which came as a big relief! For example, he paid for a pre-inspection, which helped pinpoint projects I should do ahead of listing. By knocking out those projects before my house listed, the actual property inspection went smoothly.
Total cost: $1,400
Real estate fees
I kept meticulous records for all of these costs because, come tax time, these types of expenses can help reduce the amount I’ll owe on capital gains taxes from the sale of my property.
The listing agent I contracted with also paid for home staging, which cost a couple thousand dollars and that most sellers have to pay for themselves. Pro tip: If you’re thinking about selling your home, always ask the listing agents what costs they’ll cover in the marketing and sale of your home. It can help cut down on the cost of selling, which ultimately means more money in your pocket.
I didn’t pay out of pocket, per se, for my agent — so the money he made came out of the sale of the house. All it meant was I took home slightly less money for the sale of my home.
Total cost, not spent out of pocket: $13,000
How to consider spending, or saving, when selling your home
If you’re in a seller’s market, it’s possible the costs could be split with the buyer. Or, you could reduce the selling price slightly as a concession so the buyer can make the repairs themselves, Crowell says. You could also proactively address the issues by listing your home “as is,” Crowell says.
Other potential options to help pay for fixes could include a home equity line of credit (HELOC) or a “fix now, pay at closing” repair company. It’s a good idea to weigh all of your options with your real estate agent.
Further Reading
I Tried the 90/90 Rule and My Closet Is Now Fully Decluttered
See How a Stager Used Paint to Transform a 1950s Living Room
