As cash home buyers, we often see homesellers forget to consider the holding costs of their home when deciding how and when to sell. Holding costs are the costs you incur while waiting for your home to receive an offer, then close escrow. These costs usually include mortgage payments, utilities, taxes, repairs, and upkeep.
As long as your house is on the market, or even under contract, you will continue to pay these expenses. These expenses can quickly add up, especially if the escrow closing date gets pushed further back than you anticipated.
Our holding cost calculator will help you get a better idea of your holding costs and how they will affect your final proceeds. It will also help you make a strategic decision about how and when to sell your home.
House Buyers of America has been buying and selling homes since 2001, and we’ve put our extensive experience to work in designing this calculator. It will help you get an accurate estimate of the holding costs that affect your net proceeds. To get started, enter the key factors that affect your monthly house expenses.
Certain figures, such as utilities and taxes, may differ each month, but by entering an average amount for each, you’ll get a good idea of the costs.
Steps for using the calculator:
The calculator will take your monthly costs and multiply them by the number of months you anticipate holding your home. For example, if you think your home will be on the market for six months, multiply the total expenses by six to get a clear picture of your total holding expenses.
Let's further break down what holding costs are and how to understand them. Holding costs, often called carrying costs, include the recurring expenses associated with owning a property before a sale is finalized at closing.
Holding costs begin the minute you take ownership of the property and don’t end until the property is officially sold to a buyer.
Whether you have an offer on your home or not, you are still responsible for these costs. Every day that you own the property incurs holding costs, which is why we advise you to close on your home as quickly as possible. If you are waiting on a higher offer, or have listed your home with a real estate agent, an extended timeline can cost you.
Holding costs include most expenses you pay monthly for your property, with the largest expense being the mortgage payment. Here is a list of the typical expenses that you pay for your home:
While holding costs can vary slightly and each situation is different, all holding costs are the costs you incur in maintaining any property that you own.
Understanding your holding costs provides a clear framework for the choices you have to make as a homeseller. This allows you to determine pricing strategies, potential concessions, and closing timelines. Estimates are often used by our clients to see if waiting for a higher offer is best for their situation.
You’ll need to keep your holding costs in mind when you:
Your holding cost estimates will help you plan your budget and create a realistic timeline for your home sale. When you factor both time and price you can make a clear decision on either getting the top sale price or decreasing holding costs.
Since most holding costs are monthly expenses, it is easy to dismiss them as a normal part of home ownership. We often see this common oversight. However, they do add up over time, and when you need to put your money elsewhere, like toward retirement or a new home, they can financially weigh you down. This is particularly true if you have an offer on your home and the closing timeline keeps getting extended. Closing delays can knock you right out of your budget.
Let's look at an example:
A homeowner with total monthly costs of $3,500 anticipates their home will be on the market for only three months. This would result in $10,500 worth of holding costs. If the home doesn’t sell in that time frame, say it takes another two months for an offer to come in, meaning the holding costs have rocketed up to $17,500. And that does not include the 30-60 days it takes to actually close on the house once an offer is accepted. That would be an additional $3,500 - $7,000 tacked on.
Closing times are affected by financing delays, repairs, inspections, contingencies, and further negotiations, and are often out of the homeseller's control. It’s easy to see how holding costs can quickly add up.
Most homesellers don’t plan on their home sitting unsold for long periods of time. We see this quite often. However, unexpected delays can extend closing timelines beyond what most budgets allow for. It’s important to remember that every situation is different, and that many home sales involve some degree of uncertainty.
Moving to a new home while retaining ownership of another means you are covering the costs of two properties instead of just one.
Many homes sit vacant while waiting to be sold. Whether the owners have moved into a rental, moved in with family, or passed away, vacant homes can cause holding costs to compound.
Inherited homes come with their own set of challenges, particularly if they need extensive repairs or updates. Ongoing expenses of inherited homes can be quite expensive, and legal title can drag on through the courts.
Selling timelines can also be extended due to needed repairs. Securing contractors, materials, and money for repairs usually takes much longer than intended. Especially if unexpected repairs come up after an offer is accepted.
Buyer financing problems are not uncommon in home purchases. Loans fall through, incomes change, jobs are lost, or verifications turn lengthy. All of these can cause delays in buyer loans and stretch your closing timeline even further.
Here are some common questions we get from homesellers concerning holding costs.
Holding costs comprise all the expenses involved in owning a home. These include mortgage payments, utilities, maintenance, HOA fees, insurance, and property taxes.
Holding costs affect your net proceeds by reducing the amount of money you keep from the sale of your home. Every month that you own the home costs you money.
Yes, even after you accept an offer, holding costs continue until the property legally changes hands.
Yes, repairs and maintenance are included in holding costs since they contribute to monthly expenses. Repairs and maintenance can include HVAC, lawn care, and roof repairs.
Expect to pay holding costs until your home is sold and legally changes hands.
Yes, your holding costs will be greatly reduced with a fast sale. Since holding expenses depend heavily on closing timelines, the quicker your home sells, the fewer expenses you will incur.
Holding costs are ingrained in homeownership, repairs, mortgage payments, and other expenses. Once you decide to sell your home, these expenses carry a new significance. For each month you own the home, you incur costs that you either won’t recoup or will recoup only a small amount.
Utilize our holding cost calculator to better understand these costs and assist you in making educated decisions about your finances.
If you would like to learn more about cash home buyers, House Buyers of America can walk you through your options. We purchase homes in As-Is condition. No repairs needed, no agent commissions, and no stressful showings. We would be happy to help you find your best home-selling path.
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