What are net proceeds in real estate? – David Reecher
Net proceeds refers to the amount of money a seller takes away from selling a home. This is different from the homeowner’s equity in the home because it takes into account agent commissions and closing costs, which are paid by the seller and subtracted from the sale price. Closing costs include:
- Balance of all outstanding mortgages and additional liens on the property
- Commission to the seller’s agent
- Commission to the buyer’s agent
- Excise tax (varies by state)
- Any additional closing costs owed by the seller (buyers and sellers can sometimes negotiate over who pays which fees)
While you may know your mortgage balance, the remaining costs can vary and depend on your specific home, location, and type of transaction. If net proceeds are negative, the seller must either bring money to the closing table to ensure all mortgages are paid off, or get bank approval for a short sale. Your agent can help you determine whether your net proceeds on the sale of your home will be sufficient to avoid a short sale.