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In some cities, the cost of selling a home can hit $76,000

These costs — both hidden and expected — have grown in lock-step with rising home prices. Read More...

Selling a home isn’t a one-way ticket to making a profit — rather, it can come with fairly hefty costs depending on where you live.

Home owners across the U.S. may need to spend nearly $21,000 to sell a median-priced home this year, according to a new report from real-estate firm Zillow ZG, -0.95%  and services marketplace Thumbtack. That’s up from roughly $15,000 two years ago.

The bulk of this amount — more than $14,000 — are closing costs, including real-estate agent commissions and state transfer taxes. For the report, Zillow assumed a 6% fee, based on the home’s sales prices, for the agent commissions. Transfer taxes were computed based on the tax rate for each state, which was then applied to the median home value in that state.

Because these costs borne by the seller are tied to the home’s price, they vary greatly across the country. In Houston, for instance, the estimated closing costs for a median-priced home are just over $12,000. But in San Jose, Calif., these costs can exceed $76,000. That’s based on the dramatically different house prices in those two places.

‘Selling is often a complicated process that can sometimes require extensive prep work in order to put your best foot forward for a successful sale.’

—Skylar Olsen, Zillow’s director of economic research

“Selling is often a complicated process that can sometimes require extensive prep work,” Skylar Olsen, Zillow’s director of economic research, said in the report. “It also comes with huge transaction costs that aren’t necessarily top of mind.”

The remainder of the costs relate to home prep, which includes everything from cleaning and lawn maintenance to remodeling and staging the home. Nationally, these costs averaged $6,570. Thumbtack calculated this figure by examining tens of thousands of quotes from small-business owners on its platform around the country.

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For its analysis, Thumbtack considered the seven most popular home-prep projects completed by professionals who use the platform: carpet cleaning, interior and exterior painting, lawn care, home staging, housing cleaning and local moving. Home-prep costs also vary from market to market, largely due to the cost of labor and materials involved.

How to reduce the costs of selling a home

The good news for home owners: These costs are not necessarily set in stone — and being strategic can save them a lot of money. That’s particularly important in parts of the country where housing markets are softening and sellers are less guaranteed of turning bumper profits as they were in recent years.

For starters, sellers should keep in mind that real-estate agent commissions are indeed negotiable. Particularly in popular markets or in cases where a home is especially desirable, sellers could have a leg up in setting a lower commission.

Another option is the for-sale-by-owner route. Selling your own home can be a challenge — you’ll need to be available to show it to potential buyers and handle all the paperwork and financial transactions yourself. But in some parts of the country, home owners are better off going this route despite these hassles.

Read more: Why so many property listings advertised as ‘bargains’ sell above the asking price

One simple way to reduce home-prep costs is to do the work yourself. Those who do want to hire a professional may find that they can get better prices with referrals from neighbors, friends and family, or by old-fashioned haggling.

Sellers should also be strategic about pricier changes, including painting and remodeling. A fresh coat of paint can do wonders, but choosing the wrong color could put you at a disadvantage when it comes time to list the property.

Moreover, most major home improvement projects don’t actually fetch a 100% return on investment when the home is sold. Therefore, sellers may want to prioritize projects that will ensure the home is in a good condition from a home inspector’s standpoint. Some buyers may expect the seller to cover those costs anyway, and not devote money to flashier projects.

Are you a young family thinking about budgeting, investing, saving for retirement or buying a home? We’d be eager to talk to you as part of a personal finance project we’re working on. E-mail [email protected] to learn more.

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