Selling Costs
Selling costs are all the expenses incurred when you exit a real estate investment. For a fix-and-flip, they are paid at the closing table when you sell the renovated property. For a buy-and-hold investor who eventually exits, they reduce the net equity you walk away with. They are non-negotiable, and beginners routinely underestimate them.
On a $290,000 sale price, selling costs typically run $17,000–$30,000 — roughly 6–10% of the sale price. That gap between ARV and net proceeds is not profit. It is cost of sale.
What selling costs include
| Cost item | Typical range | Based on |
|---|---|---|
| Listing agent commission | 2.5–3% | Sale price |
| Buyer's agent commission | 2.5–3% | Sale price |
| Closing costs (seller-side) | 1–2% | Sale price |
| Transfer / recordation tax | 0.1–2%+ | State and county-specific |
| Title insurance (owner's policy) | 0.3–0.5% | Sale price |
| Attorney fees (where required) | $500–$1,500 | Flat |
| Property taxes (prorated to close) | Varies | Days owned |
| HOA transfer fee | $0–$500 | If applicable |
| Staging (if used) | $1,500–$5,000 | Project-specific |
Worked example
A fix-and-flip selling at $290,000 ARV:
| Cost item | Rate | Amount |
|---|---|---|
| Listing agent commission | 2.8% | $8,120 |
| Buyer's agent commission | 2.8% | $8,120 |
| Closing costs | 1.5% | $4,350 |
| Transfer tax | 0.5% | $1,450 |
| Title insurance | 0.4% | $1,160 |
| Attorney / settlement fee | Flat | $800 |
| Staging | Flat | $2,500 |
| Total selling costs | ~9.1% | $26,500 |
Net proceeds from sale: $290,000 − $26,500 = $263,500
That $263,500 must cover the acquisition, rehab, holding costs, and financing costs before you see profit.
Selling costs in the 70% rule
The 70% rule's 30% buffer is specifically designed to accommodate selling costs plus profit:
| Component | Typical allocation of the 30% buffer |
|---|---|
| Agent commissions | ~6% |
| Closing costs, title, transfer | ~2% |
| Holding costs | ~2–4% |
| Contingency buffer | ~3% |
| Profit | ~10–15% |
Add those up and you get 23–30% — which is exactly why 70% is the ceiling, not the starting point. Offers above 70% compress profit or eliminate it entirely.
How selling costs vary by state
Selling costs vary significantly by geography. Two states with identical ARVs can have very different net proceeds:
| State | Transfer tax range | Notes |
|---|---|---|
| Florida | 0.7% | Relatively low |
| Virginia | 0.25–1.7% | County-specific |
| New York City | 1.425–1.825% | Plus NYS transfer tax |
| Pennsylvania | 2% | Buyer and seller each pay 1% |
| Illinois | 0.1% | Very low |
Always verify the transfer tax and local closing cost norms for your specific market before underwriting a flip.
Selling costs for buy-and-hold exit
For a rental property held long-term, selling costs come at the end of the hold when you exit. They are often forgotten in long-term return projections.
On a $200,000 rental property held 10 years, selling costs at exit of 8% = $16,000. That is part of your total return calculation — subtract it from the projected sale proceeds before calculating IRR.
Common mistakes
1. Using only agent commission to estimate selling costs. Commission is the largest single item but not the only one. Transfer taxes, closing costs, and staging add 3–5% more. Using 6% to estimate selling costs consistently understates the actual number.
2. Not accounting for geographic variation. A flip in New York City has significantly higher transfer taxes than one in Georgia. Underwrite with local numbers, not national averages.
3. Forgetting property taxes prorated to close. If you hold a flip for 7 months, you owe 7/12 of the annual tax at closing. On a $5,000/year tax bill, that is $2,917.
4. Overlooking HOA transfer fees and special assessments. In markets with HOAs, there can be transfer fees of $200–$500 and outstanding special assessments that become the seller's obligation.
Frequently asked questions
Are buyer's agent commissions still standard? Since the 2024 NAR settlement, buyer's agent compensation is negotiable and no longer required to be offered through the MLS. Practice is evolving — some transactions now separate buyer's agent compensation. Underwrite conservatively (include it) until market norms are clear in your specific market.
Can I reduce selling costs? Yes — some investors sell to cash buyers or investors directly (without MLS listing) at a discount that offsets or exceeds the commission savings. Others use flat-fee listing services for the listing side at 0.5–1%. The tradeoff is typically fewer qualified buyers and potentially lower final price.
Should I include selling costs in my pro forma from day one? For fix-and-flip: absolutely, from the first analysis. For buy-and-hold: include them in your IRR and projected total return at exit. Leaving them out overstates your eventual equity.
Selling cost estimates are illustrative and vary by market, transaction, and property type. Always verify local transfer taxes and closing costs. This is not investment advice.