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Ed Johnson
Ed Johnson, HR & Business Operations Consultant
Category: Finance
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Experience:  Central Michigan University, MSA Candidate; Global Compensation Operations Mngr; AA Degree Lib Arts
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If I owe 78,000 on my home, how much do I need to sell ...

Resolved Question:

If I owe 78,000 on my home, how much do I need to sell it for to make a profit after all the realtor cost etc?
Submitted: 6 years ago.
Category: Finance
Expert:  Ed Johnson replied 6 years ago.

Daer nelly,

IN order to tell you what you need to sell it for to make a profit, I need to know additional information. If you can, please provide the following:

  1. original cost of the home?
  2. closing costs when you bought it?
  3. approximate cost of any improvements or additons. (including landscaping)
  4. approximate cost of any major repairs (repairs made that are intended to last one year or more. such as shingles, flooring, etc)
Customer: replied 6 years ago.
The purchase price was 76,900. I know we owe $76,368.22 exactly.
When we bought the house we rolled the inspection and survey etc all into closing making the closing cost around 5,000.
The roof is two years old and the house has new vinal siting on it.
the only repair needed is the garage door. Just needs the spring replaced.
The house is already landscaped
Expert:  Ed Johnson replied 6 years ago.

Dear nelly,

Thank you for the additional information. I really need to know the cost of those items.

So i will estimate.

The key to knowing what price to sell at to make a profit, you need to know the capital gins formula. I assume you meet the capital gains exclusion rules of having owned and lived in the property as a primary residence for 2 of the past 5 years.

capital gains formula (profit formula if you will)

Capital Gains = sale price - (original cost, + improvements and additions, + major repairs, + closing costs you did not orignally deduct,) - the cost of selling

Where cost of selling includes the realtor fees, closing costs of the seller, transporation, advertising, etc.

So for purposes of your situation, I will make some estimates. If you know the exact figures you can substitute.

  • Original price: 76,900
  • unrealized closing costs from your purchase. Now in figuring this, you would have been able to deduct some points and interst and taxes that were part of those closing costs. the 5,000 represents 6.5% of the purchase price. You would not have been able to legally take the entire 5,000 as a tax dedctin in prior years, but you could take some. Most likely 3% of the purchase price. So lets assume you still have 3.5% to take when you sell the property. I would really need to see the HUD form to know for sure. 2,768.00
  • You replaced the roof 2 years ago. The cost of that must have been about 40 dollars a square (10X10 section) at a minimum. and up to 120 dollars per square at max. So lets assume it was 80 dollars per square to do the roof. I assume a 30 foot by 15 foot for each side of the roof. That would be 9 squres, so your roof may have cost you 900 dollars to reshingle, plus some miscelanioous charges, lets give the cost of your repaired roof 1250 dollars
  • Vinal sideing is new: Vinal siding can cost from 1.60 to 3.20 per square foot. Lets assume the vinal siding for your property costs 2.20 per square foot. You will have to subsitute your own figures if they differ. I do not know how big your hous is, but I am assuming it is a 33 by 22 foot home. I am there for calculating that the siding may have cost about 3800 dollars. this can vary, because some of the siding companies can over charge. 3800.
  • closing costs form selling: typically 2% of selling price, plus 6% for the realtor. total of 8%. WE do not yet know the selling price.

Here are the estimated costs you need to recover in order to break even:

  1. orignal price of home: 76,900
  2. closing costs not previously deducts 2,768
  3. Roof repairs 1250
  4. siding 3800
  5. cost of selling not yet known.

Total recoverable costs: 84,718 so you need to colect at least 1.08 X the 84,718 to break even. 91,495 dollars.

If any of my estimates are close your first dollar of profit comes when you close on the house at 91,496 dollars. So how much profit do you want to make. Lets say 15%. To get a 15% profit would be about 105,000 to 106,000 dollars.

 

 

 

 

 

Customer: replied 6 years ago.
We bought the house for 76900 and didnt do any of the repairs. We have only lived there a year. My husband is being relocated and we have to sell. I want to make sure that the selling price will make enough profit to cover closing etc on the next house. I have never sold a house so i dont know what its going to cost me?????
Expert:  Ed Johnson replied 6 years ago.

Dear nelly,

If you never made the repairs, then your recovery cost will be:

76,900 + about 3.6% in HUD form costs that you were not able to deduct, plus 8% for realtor fees and expenses related to selling. that is a total of 11.6% average. Again, I am not able to be exact, because I do not have your hud form.

76,900 X 1.116 is your approximate breakeven point. = 85,821 dollars. with the mortgage payoff, 87,821 would cover it, but rounding to 88,000 would most likely cover all your costs.

But in this market you may not get even that. Many people are encurring a captial loss on their properties.

What happens when you list a home with a realtor, they do a Market Value study on the home, and set the price based on market values in your neighborhood.

it is a complicated formula that takes into consideration, the appraised value and the price of similar homes selling in or near your neighborhood over the past six month is any at all. If they have to they will go back one year.

The realors also incude in the pricing formula how long they figure the house will be on the market. They will typically attempt to price the home to move within 3 to 6 months. BUT in todays realestate market, even that may not move the home.

The problem you will have is that your home may not have appreciate that much form one year ago. You are most likely going to take a loss on this sell over the expenses and orignal cost.

 

 

Ed Johnson, HR & Business Operations Consultant
Category: Finance
Satisfied Customers: 10760
Experience: Central Michigan University, MSA Candidate; Global Compensation Operations Mngr; AA Degree Lib Arts
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