Published: May 15, 2021
We’re not going to lie to you - selling your home can be stressful. In fact, sellers often stress after selecting an offer for their home without considering all the costs and expenses that must be deducted first. They just assume they would pocket all the money they’ve received from selling their home, but that’s not the case at all.
To prevent yourself from falling victim to this same situation, you may think accepting the highest offer is the best move, but you need to make sure the offer isn’t connected to any underlying problems that could complicate the deal later on - such as a low down payment on your home and the bank doesn’t appraise your home at the proposed purchase price or a closing date that doesn’t align with your desired one.
Selling your home isn’t as simple as selling an old couch on Facebook Marketplace. To help you out some, we’ve created this comprehensive guide that goes over everything you need to know about net proceeds. When the time comes for you to look over all the offers you’ve received for your home, you will know which one to select and what to expect after you close the deal!
What exactly are net proceeds?
Net proceeds are the amount a seller receives once all costs and expenses are deducted from the total cost of the home. Having a solid understanding of the costs and expenses you’re expected to pay will help you calculate an appropriate selling price for your home.
Once you close the deal, you might be responsible for covering the following costs and expenses:
What are negative net proceeds?
Once you calculate your net proceeds and see the final amount is negative, you can fix this issue by providing cash at the closing deal to pay off the rest of your mortgage or you can receive the bank’s approval for a short sale.
Unlike a foreclosure, where the bank owns your home after you’ve failed to pay the mortgage, a short sale allows you to walk away from your home, but you won’t receive any money from the deal. While this will negatively impact your credit and make finding a new place to live a lot harder, a short sale is less damaging than a foreclosure. However, this is a huge decision to make on your own. Your real estate agent can help you determine what’s the best course of action when dealing with negative net proceeds.
What’s an example of net proceeds in real estate?
For this example, let’s say Kelly sold her home for $100,000. Now, before she can pocket all this money, she needs to cover all the costs and expenses for the home.
Kelly owes her real estate agent $5,000. She needs to pay $1,500 for advertising and digital media fees. She also has to cover $6,000 worth of closing fees. The total amount for all of Kelly’s costs and expenses is $12,500. To calculate her net proceeds, the equation would look like this → $100,000 - $12,500 = $87,500. This is the amount of money Kelly will see in her bank account.