Estimated Seller's Proceeds

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How much would you expect to profit from when you sell your house today? That is the bottom line for most home sellers when they part with their home to embark on a new adventure elsewhere or to upgrade to a different home in the same neighborhood. There is usually a strong emotional value tied to that home...After all, many memories were made there and lots of cherished times with family and friends were had during those years spent. As a result, when they part with their home, they usually want to get the most out of it, wouldn't you agree?

But the thing is, emotions don't predict home values; that's just the bottom line. When there are market cycles that run up to the upside or to the downside, i.e. seller's market or buyer's market, that's when things get pricey. However, profit is profit, and wouldn't you want to know how much you can expect to net when you sell your home in either market?

Let's get to the brass tacks. Let's say you had immediate 20% equity when you bought your first home for $550,000 with a fixed 3.50% 30 year mortgage loan. So you bought the home in 2014 and you want to sell by July 2nd, 2020. During those years you put in $100,000 worth of renovations and paid all of your mortgage dues on time for a monthly payment of $1,953.34 that factors in interest and principal costs. Since you bought your home in 2014, the price has since appreciated to $795,995 and it was listed for that amount. Because it was priced so well to market, it was sold by July 2nd close date but it was for a sale price of $716,395—roughly 90% sales to list price, and above the average in that neighborhood. By this time, you accumulated roughly 30% of equity and owe $385,254.58 on the principal loan amount. So we can abruptly estimate gross profits of $231,140.42 after figuring in 78 monthly mortgage payments of $1,953.34. After closing costs (privileges) of $49,598 estimated using figures from the estimated sellers costs page, that profit estimate is $181,542.42 for the seller. Using my own calculations and factoring in other costs with a conservative equity estimate of 26%, I personally came to a number of $117,778, so it's reasonable to expect a profit range between $117,778 to $181,542.42. This also doesn't factor in other necessary costs or bargaining tools such as proration of taxes evenly distributed between buyer and seller nor does this factor in things such as prepayment privileges (costs) if paid early and etc.

TLDR:

78 Months Prior, 2014

Bought for                                    $550,000
20% Down                                    $115,000
Loan Amt                                      $435,000
Int. Rate                                         3.50%
Equity Range                               26 - 30%
Principal Range                   $385,254.58 - $406,961.60

 

July 2nd, 2020 

List Price                                      $795,995
Sale price                                     $716,395
Est. Closing costs                        $49,598
Est. Net Seller Proceeds       $117,778 - $181,542.42

Conclusion

Each neighborhood and home is different so you can expect profit to either be more or less than this estimate for the same list price and initial purchase price. Depending on local area statistics and other factors that can effect pricing, the margins may vary. Please use this as a guide but not a tool to factor in your own home pricing endeavors. Let a professional guide you in the right direction as to where your home values are driving towards; and what the statistics like days on market or amenities or features can do for home pricing and market expectations.

Estimated Seller's Proceeds Estimated Seller's Proceeds Reviewed by Alex Sung on June 23, 2020 Rating: 5

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