A home’s sale price and the amount the seller receives are two very different numbers. Broker compensation, title and escrow fees, inspection repairs, mortgage payoffs, taxes, HOA charges and other expenses all reduce the final proceeds.
A seller’s net sheet combines these costs so the seller can evaluate an offer based on the amount they are likely to receive after closing.
The Basic Calculation
Sale price − selling expenses − mortgage and lien payoffs − seller prorations = estimated net proceeds
As an example, assume an Arizona residential property sells for $1,000,000, with 5% total seller-paid broker compensation, divided equally between the listing broker and the buyer’s broker.
Estimated Selling Expenses
| Expense | Calculation or assumption | Seller cost |
|---|---|---|
| Listing broker compensation | 2.5% of $1,000,000 | $25,000 |
| Seller compensation to the buyer’s broker | 2.5% of $1,000,000 | $25,000 |
| Owner’s title insurance policy | Estimated | $3,000 |
| Seller’s share of escrow fees | Estimated | $1,000 |
| BINSR repairs | Actual seller cost | $5,500 |
| Recording, release and administrative charges | Estimated | $250 |
| Total selling expenses | 5.975% of sale price | $59,750 |
After these selling expenses:
$1,000,000 − $59,750 = $940,250
The seller’s proceeds are therefore approximately $940,250 before paying off the mortgage, other liens and applicable prorations.
Broker Fees Are More Negotiable Today
The long-standing expectation of a 6% total broker fee should largely be a relic of the past. Home prices have increased substantially, so applying the same percentage commonly used decades ago can produce a much larger fee even when the work and transaction costs have not increased at the same rate.
Broker compensation is also more transparent and negotiable today. Sellers can negotiate the listing broker’s fee separately from any compensation paid to the buyer’s broker. The final structure should reflect the property, price range, marketing requirements, market conditions and services provided.
For a $1 million sale, the difference between a 6% and 5% total fee is significant:
| Total broker compensation | Seller cost |
|---|---|
| 6% | $60,000 |
| 5% | $50,000 |
| Seller savings at 5% | $10,000 |
There is no legally required broker compensation rate. Sellers should discuss fees openly, understand how the compensation is divided and evaluate the services they receive in return.
In this example, the seller agrees to pay 2.5% to the listing broker and 2.5% to the buyer’s broker, for total broker compensation of 5%.
Seller Compensation to the Buyer’s Broker
The seller pays the buyer’s broker $25,000, equal to 2.5% of the sale price. This amount is already included within the total $50,000 in broker compensation. It is not an additional expense above the 5% total.
Compensation to the buyer’s broker can be an important part of the offer and negotiation. A buyer may have a written agreement specifying how their broker will be paid. The purchase offer may request that the seller pay some or all of that amount.
The seller should evaluate the entire offer, including price, financing, concessions, requested broker compensation, inspection terms and likelihood of closing. An offer with a higher price may produce lower proceeds if it also asks the seller to pay substantial additional costs.
All broker compensation should be clearly documented in the applicable agreements and closing statement.
Title and Escrow Fees
Arizona sellers commonly pay for the buyer’s owner’s title insurance policy, although the purchase contract ultimately determines which party pays each expense. The title policy protects the buyer against certain covered title defects or claims arising from events before the sale.
Escrow fees compensate the escrow company for handling funds, documents and closing instructions. The buyer and seller may divide these fees according to the purchase contract and the title company’s fee structure.
This example estimates:
- Owner’s title insurance: $3,000
- Seller’s share of escrow fees: $1,000
Actual title and escrow charges depend on the selected company, sale price, policy type and negotiated terms. A title company should prepare a transaction-specific estimate.
Accounting for BINSR Repairs
BINSR stands for Buyer’s Inspection Notice and Seller’s Response. During the inspection process, an Arizona buyer may use the BINSR to identify items they disapprove of and request repairs or another resolution.
In this example, the seller incurs $5,500 in BINSR repairs as an actual cost of completing the transaction.
If the seller pays contractors directly before closing, the $5,500 may not appear as a deduction on the final settlement statement. It still reduces the seller’s overall proceeds and should be included when calculating the financial result of the sale.
The repair cost should not be deducted a second time when reconciling the closing wire.
Calculating Proceeds After the Mortgage Payoff
Now assume the seller has:
- A final mortgage payoff of $400,000
- Property-tax and HOA prorations totaling $2,000
The complete calculation becomes:
| Calculation | Amount |
|---|---|
| Sale price | $1,000,000 |
| Less listing broker compensation | ($25,000) |
| Less seller compensation to buyer’s broker | ($25,000) |
| Less owner’s title insurance | ($3,000) |
| Less seller’s escrow fee | ($1,000) |
| Less BINSR repairs | ($5,500) |
| Less other closing charges | ($250) |
| Proceeds before payoff and prorations | $940,250 |
| Less mortgage payoff | ($400,000) |
| Less property-tax and HOA prorations | ($2,000) |
| Estimated net proceeds to seller | $538,250 |
Under these assumptions, the seller retains approximately $538,250 after selling expenses, repairs, prorations and the mortgage payoff.
Other Costs That May Affect the Seller’s Proceeds
Every transaction is different. A complete seller net sheet may also need to account for:
- A home-equity line of credit or secondary mortgage
- HOA disclosure, transfer or capital-improvement fees
- Unpaid HOA assessments
- Buyer closing-cost assistance
- A home warranty
- Property-tax prorations
- Solar-panel obligations
- Judgments or other recorded liens
- Contractor invoices paid before closing
- Moving, staging or property-preparation expenses
Always use the lender’s official payoff statement rather than the principal balance shown on a monthly mortgage statement. The final payoff may include accrued interest, recording charges and other lender fees.
Net Proceeds Are Not the Same as Taxable Gain
Net proceeds are the cash remaining after the expenses and debts associated with the transaction are paid. Taxable gain is calculated differently and may depend on the seller’s original purchase price, capital improvements, depreciation, selling expenses and available tax exclusions.
A seller who needs tax guidance should consult a qualified tax professional.
Before accepting an offer, request an updated seller’s net sheet using the actual sale price, broker compensation, buyer concessions, repair obligations, closing date, mortgage payoff and prorated expenses.
Contact The Cooper Group Success Property Brokers with any questions or to request a personalized estimate of your Arizona home-sale proceeds.
