King County Sellers: The Hidden Tax Nobody Warns You About

Let's talk about the costs involved in selling your home in Seattle right now. And I will say most sellers kind of snap to the commission. That's the big line item. They've heard about it. They've budgeted for it. But if you're selling a house in King County, Washington, for the first time, there is another cost that almost nobody warns you about that you will also be surprised by. It's called the real estate excise tax. And on a $860,000 home, which is the current median home price in this area, that excise tax can run you between $9,000 and $11,000. And you got to pay that before you ever pay $1 in commission. If you're selling your home in Seattle or anywhere in King or Snohomish County, and you want to know what you're actually going to walk away with net, like what's the check coming to you, then I think this video will help you. I'm Realtor Emily Cressy. I'm a broker at Keller Williams, Greater Seattle, and my website is HomeProAssociates.com. I have been helping sellers run this exact math for 23 years. And what I want to do today is to walk you through every major cost you'll see at closing. Not the scary version, not the vague version, but the real version. So that when you sit down with your net sheet, there's nothing there that's going to surprise you. So there are really three big buckets of expenses to think about when you're selling your home. So let's go through these one by one. Commission in Washington State runs on average about 5.9% of the sales price. But of course, that's totally negotiable between you, your realtor, and the buyer and the buyer's realtor. That amount typically gets split between two people or two companies, the listing agent and the buyer's agent. And it comes out of your proceeds at the closing. So when I, for example, get a commission, it goes to Keller Williams. And then Keller Williams keeps a portion, they send a portion to the franchise, they send a portion to my insurance, my business taxes, and then I get what's left. And the same thing goes for the buyer's agent. So on that $860,000 median price home in King County, this commission amount is roughly $50,000. It's the biggest number on your closing statement, and it's the one most sellers already know is coming. So here's where it gets interesting. Washington State charges what's called a real estate excise tax, R-E-E-T. And they charge this on every single home sale. And unlike a flat fee, it's graduated. The first $500,000 of your sales price is taxed at 1.1%. Everything up from $500,000 up to $1.5 million is taxed at 1.28%. And King County then adds on its own local rate on top of that. So on an $860,000 sale, you're looking at roughly $10,500 in this excise tax. And that is paid directly to the state and the county at closing. Most sellers have never heard of it, and most sellers are not happy when they see it for the first time on the closing statement. The third bucket that you're going to be paying for is what I call everything else. And this is where it's very variable, but it's not usually too panic-inducing. In Washington, sellers are usually going to pay for the owner's title insurance policy that could be $1,500 to $3,000, depending on the sale price of the home. There's also the escrow processing fee. based on when in the year you close and any homeowners association dues. And if you've negotiated repairs or closing cost credits with the buyer, those will also show up here as well. So that bucket of expenses usually lands between $4,000 and $8,000 for a typical King County transaction. But the thing that is a very real bill that most sellers don't even think about is what happens before you ever list the home, which is the pre-sale preparation of the home. We're talking cleaning, staging, paint, carpet, maybe a pre-inspection, maybe a new roof. For some sellers, this could cost as little as $2,000. But for sellers who want a really competitive presentation, it could be closer to $15,000. Generally, I'm going to not have you over-invest in completely remodeling your home. We want any money that you spend to have a positive return on investment. Like if you spend a dollar, I'd love for you to get $3 back on the sales price. And if we can't meet that goal, I'm going to be cautious about having you do the work because you're spending money to make money. And it is a good investment, but I don't want to do narrow margin things that are going to put you out or tie up a lot of your cash. Remember, all of that is optional. You don't have to do these things. So if you're tight on cash, it doesn't mean you can't sell your home, but it may affect the eventual sales price of the property. Remember, a well-staged, well-presented home almost always nets more money than a raw one where you've been living there and you just let people come walk in. You want to do as much as you can to make the property look as good as you can because people are seeing the best of the best online. They're on Pinterest. They're looking at all of this eye candy on Instagram, and that's what they're hoping to buy when they go out to the market. So to the extent you can make your home look good, it will be better received by buyers. So let's put some real numbers on this. If you're selling a home for $860,000 in King County, here is what you're looking at. Commission, $50,000. REIT, $10,500. Title and escrow, $4,000 to $5,000. We'll call it $4,500. Probrations and miscellaneous expenses, $2,000 to $4,000. We'll call it $3,000. And pre-sale preparation, you're calling $5,000. So you are looking at $70,000 to $75,000 in total transaction costs before you account for your loan payoff. And on a home with $500,000 in equity, that's still a very healthy net, but it's not the same as selling for $860,000 and keeping $860,000. So I want you to really know the difference and how real that is before you list your home. So here's the bottom line. Commission is the biggest cost. REIT is the Washington-specific one that surprises people. And then title, escrow, home prep, and prorations add up to a real but manageable third category. The only one that you have to pay out of your pocket from your cash or savings account is going to be any money that you put into home preparation. And sometimes even those costs can be suspended and paid for at closing if you're working with flexible contractors. And if you add all that together, and most King County sellers are looking at $60,000 to $90,000 in costs depending on their price point and how much they invest in home preparation. Now, as always, it's great to watch videos and learn. But if you want to run your specific numbers for your specific house with your specific loan payoff, I am here to help. I put together a free net sheet tool, which I will link to below. You can visit my website and put in your specific information. And if you'd like to talk to me or have me do this for you, you can use the calendar link in the description below this video. And we will talk through it and build your results together over the phone in about 20 minutes. I'm happy to look over it with you. And I'm happy to help. I'll see you on the next video.