Selling costs are a popular item for procrastination as you work up your budget in the early project stages. But selling costs can end up taking a fair chunk out of the profit if the flipper or wholesaler hasn’t made sufficient allowance for them. What do you need to know about selling costs even before you negotiate the purchase price?

Don’t budget assuming you’ll give away most closing costs to the buyer, even if you can. The buyer will take all of their share of closing costs – including their agent’s commission – into their calculation of what they can afford to pay for a property, and clearly that can affect your selling price.

Real estate investors sometimes help buyers on closing costs while still protecting their own profit, so the property will sell faster and stop the bleed of carrying costs. Remember that you are still paying for property expenses including utilities, insurance, possibly interest to lenders, etc. until closing.

• Know your total costs to list, stage and market the property
  I strongly advise including a professional stager in your budget. Staging can more than pay for itself as statistically it reduces time on the market, and thereby also reduces carrying costs.

• Include the full 6% commission for two real estate agents
  I recommend using a real estate agent to sell your property, because the agent will devote more energy and time to sell fast than you can. That’s because you are working other deals! Commissions are usually the most expensive part of selling costs (by far), so be sure you’ve accounted for them before negotiating your initial property purchase price.

• Factor in all closing costs
  Check with your title company to be sure you know the total of all charges paid by both buyer and seller, as these can vary by company and by deal. Closing costs include the big items costing from $200 to $500 each, such as the appraisal and the title insurance. There will be a list of ancillary fees under $100 that can add up.

I factor in 1.5% of the expected selling price to closing costs, meaning a $100,000 property sale will have $1,500 in closing costs, before commissions, down payment and so on. But you need to know your own closing cost factor from your title company to be sure you plan accordingly.

Before you negotiate the initial purchase price of your possible next flip or wholesale property, remember that selling costs add up to thousands of dollars – while you can still protect your profit by planning for them.

Have you reviewed your title company’s full list of closing costs? Have you negotiated to reduce or eliminate some of the fees?

Want to earn money with little or no investment of your own? Keep an eye out for my upcoming ebook explaining wholesaling and how to make it work for you!