Sales Expenses

Forum|Forum|2 years ago
March 29, 2024
1 reply
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Received Sellers Statement and I understand as the Seller, Mortgage charges/fees and Selling/Listing agent commissions are considered selling expenses and can be added to seller's basis to reduce cap gain. On the Seller's statement there is also listed a Seller Credit under Primary charges/credits and a temporary buydown paid by Seller under Misc Charges. Are either of these also considered selling expenses to increase the seller's basis and reduce the cap gain?

MarilynG

Level 15

Yes, these expenses can count towards Sales Expenses to increase cost basis and reduce gain. You are allowed to deduct from the sales price almost any type of selling expenses, provided that they don't physically affect the property.

Such expenses may include:

advertising
appraisal fees
attorney fees
closing fees
document preparation fees
escrow fees
mortgage satisfaction fees
notary fees
points paid by seller to obtain financing for buyer
real estate broker's commission
recording fees (if paid by the seller)
costs of removing title clouds
settlement fees
title search fees, and
transfer or stamp taxes charged by city, county, or state governments

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Mcb050032Author

Level 2

Thanks, regarding prorations/adjustments: County Taxes paid by seller are not selling expenses, correct?

Opus 17

Level 15

Appreciate the info. So would the Seller-Paid Buydown be still considered to reduce the net selling price? Thanks!

@Mcb050032 wrote:

Appreciate the info. So would the Seller-Paid Buydown be still considered to reduce the net selling price? Thanks!

I don't recognize the term "seller buydown" or "temporary buydown". What exactly is happening?

In general, most concessions are treated as adjustments to the price, because they really are. Suppose the house is listed for $150,000, and the buyer says, "I can't play closing costs, let's make the price $160,000 with the seller paying $10,000 in closing costs." The sales price (as far as the IRS is concerned) is still only $150,000.

Or, suppose the house is listed for $150,000 but it's kind of run down and the buyer offers $130,000. The real estate agent says, "it would be bad for property values in the whole neighborhood to sell for $130,000. Why don't we sell for $150,000 but the seller gives the buyer a $20,000 allowance for repairs and improvements." In that case, the real selling price is $130,000.