Why is it important to know the minimum sales price for a house?
There are many factors involved when sellling a home. If a home is sold
by owner with no real estate agents involved, the commission may not
be a factor.
In most situations, the selling party pays a commision to the selling agent
and the buyer's agent for the sale of the property. In addition to the cost
of commission, there are other costs associated with the closing of a real
estate transaction. This may include title transfer fees, surveying,
lawyer's fees, inspections, title insurance, etc.
Example: A home that is going on the market to be sold has a current
mortgage principal of $200,000. The selling agent and owner have agreed
to pay a total commission of 6% on the sale of the house with 3% going to
the selling agent and 3% going to the buyer's agent. The seller's agent
estimates total closing costs for the owner to be around $700. What is
the minimum sales price of the house to cover these costs?
Minimum Sales Price = [ Loan Payoff / (1 - sc - bc) ] + CC
sc = Selling Agent Commission ( in decimal form 3% = .03)
bc = Buyer's Agent Commission ( in decimal form 3% = .03)
CC = Total Closing Costs
Minimum Sales Price = [ $200,000 / (1- .03 -.03) ] + $700
Minimum Sales Price = [ $200,000 / .94 ] + $700
Minimum Sales Price = $212,765.96 + $700
Minimum Sales Price = $213,465.96
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