This article introduces the process of selling a home in the United States, the basic costs of selling a home, and the taxes associated with the sale of a home such as transfer taxes and VAT.
After reading it, you will have a more comprehensive understanding of selling a house in the United States.
The basic process of selling a house in the United States is as follows:
- Selecting a real estate agent
- Set the best selling price with the help of a broker
- Package the house to make it look good
- Posting the listing by the broker and officially listing the property
- Negotiate with potential buyers
- Sign contract and buyer pays deposit
- Cooperate with home inspection, home appraisal and title transfer survey
- Sign closing notary documents
- Closing procedures and delivery of the home
In addition, according to past U.S. housing transaction data, the selling price of a home is usually highest in the second quarter, then declines, and is lowest in the fourth quarter and first quarter. So investors who are interested in selling their homes can refer to this rule and choose to sell their homes during the second quarter.
When selling a house in the US, the seller will have the following fees:
Broker's commission is also the biggest one, accounting for 4 to 6% of the house price.
The cost of renovation and repairs before selling the house depends on the condition of the house.
- Seller's closing notary fee
- Homeowner's title insurance fee
- County government closing tax
City closing tax: usually much higher than the county closing costs, some cities do not have this tax.
- One year home warranty fee
- Termite inspection fee
- Deed document preparation fee
- Notary fee for documents
- Broker's fee for legal code oversight
In addition to the broker's fee, the other fees listed above add up to roughly 1% of the home price.
It is worth noting that as of October 1, 2019, the rules for broker fees in Washington State, primarily in the Seattle area, have changed. All new listings are paid by the original seller for the buyer and seller's broker, becoming an option for the seller to pay only the seller's broker's fee.
Selling a home in the US will involve some taxes in addition to the basic fees mentioned above:
Transfer Tax / Transaction Tax
Selling a home in the United States usually requires a transfer tax or transaction tax, which varies from state to state. Some may pay only state transaction tax and no city transaction tax, while others pay both.
Federal VAT
If the purchase of a home generates a profit, then the appropriate VAT is levied. There are two scenarios:
The first is when the owner holds the U.S. property and sells it within one year, so the increase in value is subject to personal income tax.
The second is when the owner holds the property for more than one year and sells it, and the profit is subject to VAT. There are three VAT rates: 0, 15% and 20%.
Withholding tax for foreign sellers
In order to prevent foreigners from selling their homes without filing a tax return and costing the U.S. government tax money, the U.S. has introduced regulations that require any foreign seller to withhold 10% of the contracted transaction amount and submit this tax to the U.S. Federal Tax Administration within 20 days of the transaction, otherwise the seller may face a hefty fine. Of course, after accounting, the extra portion will be refunded to the seller.
