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If you’re in the process of selling your home, you likely have a lot on your mind, from paring down your possessions to simplify the packing process to finding a real estate agent who will help make things move as quickly and smoothly as possible. There’s also the matter of figuring out the magic price tag to place on your house to get it sold quickly, while still leaving you with as much in net proceeds as possible.��

If you’re new to the home selling world, the most basic definition of net proceeds is the amount you walk away from after selling your home. However, this isn’t the same as the sale price. What are the other costs and fees that take you from the sale price to net proceeds? Let’s take a closer look at how net proceeds are calculated, and what calculating them looks like in practice.

What are net proceeds?

The net proceeds are what a home seller actually takes away from the sale of their home after all costs related to the sale have been deducted from the sale price.

While you’d love to set your home’s listing price and walk away from the sale with that exact amount in hand, there are a number of fees that come along with selling a home that will be deducted first. These include the commission of your real estate agent, title insurance, attorney fees, and escrow fees. If you’re still paying off a mortgage, that will also reduce your net proceeds, since the mortgage balance is generally paid off with the money gained from the sale of your home.

Because the amount you walk away with differs pretty significantly from the amount you list and sell your house for, it’s smart to go into the process of selling your home with this in mind. You may even choose your listing price based on how much you’re hoping to receive in net proceeds.

How to calculate net proceeds

In order to know how much you’ll walk away with following the sale of your home, it’s important to know and track the expenses you’ll need to deduct from the sale cost. Here are some of the expenses you should keep track of in order to calculate your net proceeds:

• Any remaining unpaid balance on your mortgage at the time of the sale
• Your agent’s commission from the sale
• Fees for staging your home for showings
• Attorney fees
• Escrow fees
• Loan origination fees
• Excise tax
• Prorated property tax

The exact amount you’ll pay in each of these categories — and whether you’ll be obligated to pay them at all — will vary depending on a number of factors. These include the state in which your home is located, the rates you’ve negotiated with your real estate agent and others involved in the sale, and which costs you’ve agreed to cover with your buyer.

Because there’s so much variability, the only way to calculate your net proceeds is to know which costs you’ll be responsible for and their amounts, then subtract the number from the sale price of your home.

Net proceeds examples

To help visualize the process of calculating the net proceeds for your home sale, we’ll walk through some examples.

Let’s say you sell your home for $350,000. Your costs as the seller include paying off the mortgage, which has a remaining balance of $100,000, paying real estate commission and fees of $10,000, paying $1,000 in attorney fees, and paying $1,500 in closing costs and sales taxes. The equation looks like this:

• $350,000 - $100,000 - $10,000 - $1,000 - $1,500 = $237,500 net proceeds

In our next example, let’s say your home sells for $680,000. You have $250,000 left to pay off on your mortgage and must also cover the real estate commission and Realtor fees totaling $45,000, $5,500 in attorney and escrow fees, and $4,263 in prorated property tax. Here’s the equation to determine your net proceeds from the sale of your property:

• $680,000 - $250,000 - $45,000 - $5,500 - $4,263 = $375,237 net proceeds

Remember that the numbers for each home’s sale will be highly variable depending on market-related factors, the location of the home, and which fees the seller has been able to negotiate down or delegated to others altogether. The amounts you see represented here are intended to give you a sense of which fees may come up in your unique experience and how you’ll approach calculating your own net proceeds — they will not give you a sense of how much you’ll be able to anticipate receiving from the sale of your own home.

How net proceeds can affect your taxes

An important consideration to keep in mind as you approach the sale of your home is that, depending on the classification of the property you’ve sold, your tax bracket, and what you intend to do with your net proceeds, your home’s sale could trigger what’s known as a tax event. In the case of a primary residence, if you end up earning far more than you initially paid for your home, you may be taxed for “excess profits” by the IRS. This isn’t very common, but even if you do meet the criteria for this tax, you may be able to avoid paying it by using those profits to buy your next home.

What do net proceeds mean for you?

What are net proceeds going to mean for you as you plan for the sale of your home? Keep in mind that how much you make in net proceeds can impact how much you’re able to put toward the purchase of a new home. You may also factor them into the equation as you plan to cover the costs related to your move, or any upgrades you hope to make at your new house, such as building a new addition. By advocating for yourself and negotiating lower rates and fees any time you’re able to do so, you can increase your net proceeds and walk away from the sale with more money in your pocket.