If all it took was throwing up a For Sale sign in your front yard, real estate agents would have lost their jobs a long time ago.  Unfortunately, the sad truth is, there are many other costs that some Home Sellers don't realize are necessary to convey real property in the great state of Michigan!!  That's not to mention, nearly every cost associated with the sale of a home comes directly from the Seller's proceeds.  However, before you begin to freak out about how much money you "could" lose, here's a quick breakdown of what it takes to sell a home in today's Metro Detroit real estate market:

Mortgage Balance

Before you can convey clear title of your home, your mortgage balance MUST be satisfied from the proceeds of the sale!  Normally this would go without saying, but, in the case of a Short Sale, a bank may agree to take less than what is owed.  In some cases, you may end up having to bring money to the closing table, in order to break even.  Note that this is NOT a common occurence.  Many private sales are able to satisfy their respective mortgage balances.

Prepayment Penalties

This will go hand-in-hand with the aforementioned.  Call your bank to determine whether or not they will charge you for an early mortgage payoff.  Yes, it happens!!

Brokerage Fees

Typically between 6-7% of the sale price, this is normally split between the cooperating brokers to compensate for services rendered on both sides of the transaction.  This will include costs pertaining to the Multiple Listing Service (MLS), office maintenance fees, legal liabilities, marketing expenses, correspondence and/or negotiations, salesperson compensation, and so forth.

Owner's Title Policy

In Michigan, this a cost normally incurred by the Seller.  This will allow for a proper title search in order to convey clear title to a homebuyer, notwithstanding any existing liens, besides the current mortgage, that have yet to be satisfied. Your agent will be able to give you a ballpark estimate on this cost, based on the figures supplied by their preferred title agency.

State Transfer Tax

This is mandatory for every real estate transaction that occurs in Michigan.  $8.60 per $1,000 of the sale price.

Home Equity Loans/Second Mortgages

Yes, these will have to be taken care of, in addition to the first mortgage.

Recording Fees

Any additional costs incurred by recording various legal documention necessary to facilitate a transaction on public record.  This may include powers of attorney, mortgage discharges, etc.

City Certifications

Depending on the local municipality in which you live, you may be required to submit to a local inspection of the premises to ensure adequate occupancy conditions.  This will vary, as in some areas, it is NOT required.

Home Warranty

In an effort to keep your home as marketable as possible, you may elect to provide a Home Warranty to a prospective Buyer, to cover any unexpected costs that occur AFTER the closing, with regard to the major home systems.  The cost of this will vary from company to company.  Check with your agent to determine what components may or not be covered by a standard Home Warranty.

Agency Fees and Paperwork Maintenance

Most real estate offices will charge a flat fee to store and maintain transaction documents electronically.

Title Company Document Preparations

A closing will typically take place at either a title company or a real estate office.  This fee provides for the coordination of the closing between all parties, in addition to any costs incurred to prepare the correct legal documentation to faciltate your transaction.

Seller Concessions

It is common practice for homebuyers in Michigan to ask for closing cost assistance.  Although negotiable, this can be up to 6% of the sale price, depending on the Buyer's financing arrangements.

Use and Occupancy

Will you need to remain in the home after the closing?  Remember, the new Buyer will have a mortgage payment to take care of!  This is prorated for each day of the month, until the property is vacated.  The entire sum of the occupancy period is set aside into an escrow account at closing.

Misceallaneous Expenses

Work with your Agent to determine if there may be any other costs.  This could involve repairs required by government financing initiatives, inspection fees, overnight payoff letters, etc.

Tax Prorations

This will depend heavily on the closing date, relative to the tax year.  Work with your agent to determine how this will affect your bottom line.

Whew!  How's that for jaw-dropping?  Yes, some of these fees may be negotiable, but it is standard practice for these costs to come out of the proceeds of the sale.  And understand that for every cost that you incur, a Buyer is responsible for nearly as much out of their own pocket, once you take into account the various costs incurred from the financing of a home.  Work with your Agent to determine an acceptable sale price.  They will be able to give you a rough estimate of the numbers that will affect your bottom line.  Remember, we're trained professionals!!

Always feel free to let me know if you have any questions about this information!  I will be happy to assist you!!

Most Buyers understand that EVERY deal runs the risk of falling apart, based on a number of contingencies outlined in a purchase agreement.  As agents, we do our best to ensure that things stay together and run smoothly, but not every transaction is created equal!  Think of it like this...if and only if the terms of a stated contingency are met will the contract proceed as written.  Here is a list of the most common contingencies:

Inspection

The homebuyer will be allowed to conduct a private inspection, at their sole expense, in an established timeframe from the date of seller acceptance of the purchase agreement.  This is a fundamental part of most sales contracts, and it solidifies a Buyer's commitment to purchase the subject property.  Upon completion of said inspection, the homebuyer is presented with 3 options: 1. Accept the property condition as-is, 2. Express dissatisfaction, and request a release from the sales contract, or 3. Request that the Sellers complete certain repairs at their sole expense or modify the purchase price to reflect such.  This becomes another negotiating point before the sales contract is to proceed.

Financing

Without being able to secure the proper financing, a homebuyer will be unable to fulfill the terms of a purchase agreement, no matter the circumstances.  Normally, a purchase agreement will state how long a prospective homebuyer will have to submit a mortgage application, and, ultimately, secure financing (typically 30-45 days).  If after such a time, the Buyer cannot obtain financing, the purchase agreement becomes null and void, and both parties are released from the contract.

Appraisal

As is required with government-insured loans, once a Buyer is satisfied with their home inspection, their loan officer will order an appraisal to protect the interests of both parties.  Fashioned in a very similar manner to that of a Market Analysis, an appraiser will compare a subject property to those in the same neighborhood with similar features, in an effort to establish a home's current market value.  Once this number is obtained, it is cross-referenced with the sale price in the purchase agreement.  If the appraised value comes in at or above the sale price, the terms of the purchase agreement proceed as usual, and a Buyer's mortgage application is submitted to underwriting for final approval.  On the flip-side, if the appraised value is less than the sale price, it presents another necessary negotiating point.  If a Seller is unwilling to execute an amendment to reduce the purchase price to appraised value, the Buyer will be unable to obtain financing, and the deal will fall apart.

Short Sale

"Subject to third party approval." - This is the red flag that points to a short sale contingency.  Very simply, the Seller's bank is required to approve the sale before the terms of the purchase agreement are able to proceed as usual.  Depending on how the Short Sale Addendum is written, various other contingencies, such as inspection, may occur before or after bank approval.

Of course, other various contingencies may be incorporated into a purchase agreement, but these are the most common in the current real estate market.  Work with your agent to determine how your home purchase will be affected by the contingencies of a purchase agreement.