October 5, 2022

Homes Are Illiquid And Ridiculously Costly To Sell

When home values were soaring during the housing boom, the cost of selling a home  didn’t really bother many sellers. The numerous fees involved when selling a home seemed inconsequential as home values soared year after year during those wonderful housing bubble years.

That was then and this is now. With housing prices in many parts of the country at levels last seen in 2003, sellers are noticing the locus like swarm of service providers that  descend upon every home seller.

Courtesy: bloomberg.com

Courtesy: bloomberg.com

Here is a partial list of some of the costs involved in selling a home according to a nifty Bloomberg article (see all 15 points along with the graphics presented in the article here).

  • Realtor commission
  • Staging the home
  • Painting the interior
  • Property taxes
  • Transfer taxes
  • Legal fees
  • Title insurance
  • Potential capital gains tax

Add everything up and the estimated closing costs can easily exceed 10% of the property’s value.  The high closing costs also explain why many home owners with thin equity and small savings cannot move to another house – the seller would have to bring a substantial amount of cash to closing to cover closing costs.

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