Retirees Who Sold the House Up North Before Moving South Say They Priced the Wrong Half of the Move
Plenty of retirees selling a paid-off home in the Northeast feel like they know exactly what they have to spend in Florida or the Carolinas. The number in their head and the number that actually arrives at closing turn out…
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
When retirees leave Connecticut or New Jersey for Sarasota or Greenville, they tend to weigh property taxes against hurricane season, and many assume their home equity travels south intact. It doesn’t. Selling costs take a bit out of what actually lands in the bank account at closing. This piece looks at the half of the move that often gets less attention: what it really costs to get out.
Where Equity Leaks Before It Reaches the South
Commission is the first cost, and the National Association of Realtors settlement uncouples buyer and seller agent commissions. One industry tally puts the national average total commission at 5.7% of the sale price. On a $900,000 house, that’s $51,300.
Concessions, the next cost, are money the seller gives the buyer toward closing costs or repairs. Redfin found 44.7% of U.S. home sales included a seller concession in August, up from 42.6% a year earlier. Transfer and recording taxes, another potentially big expense, will vary by state and town. Attorney fees also apply in states that require one at closing. Repair bills requested after inspection get paid before sale money comes in. Existing home sales ran at a 3.98 million annualized pace, the lowest reading in two years, giving buyers leverage.
How a Paid-Off House Still Triggers a Tax Bill
Federal law lets a seller exclude up to $250,000 of gain, or $500,000 for qualifying joint filers, if the home was owned and used as a principal residence for 2 years or more during the 5-year period before the sale. Those limits were set in 1997 and have not increased with inflation. Long-time owners can exceed the limit without realizing it.
The gain is the sale price minus selling costs, minus adjusted basis. Adjusted basis means what the house originally cost plus capital improvements. The mortgage balance doesn’t even enter the calculation yet, so owning the house free and clear tells the IRS nothing about what’s taxable.
Let’s say a couple bought for $180,000, recorded $60,000 of improvements like a new roof and kitchen remodel, and sells for $900,000. After commission, their gain is $608,700, leaving $108,700 taxable. Without proof of improvements, the taxable amount rises to $168,700. Receipts, contracts, and permits turn remodeling into a lower tax bill.
Selling Into One Market and Buying in Another
Timing creates costs either way, since selling first means paying for short-term rental, storage, and two moves. Buying first means carrying two sets of property taxes, insurance, and utilities, plus a possible bridge loan, which can run between 8% and 15%.
The two markets move independently. Cotality found seven of the ten coolest markets were in Florida, including Cape Coral and Naples, while Boston, New York and Philadelphia stayed strong. A retiree who has mentally counted a certain amount of equity and watches the destination move against them ends up worse off than the math suggested.
Insurance also cuts into proceeds, with Florida’s average premium projected at around $8,458 by the end of 2026, compared with a national average expected at $3,057. A quote on the actual address before closing is the only reliable figure.
Getting the Real Number Before the Sign Goes Up
Start with an estimate of net proceeds after commission, likely concessions, transfer taxes, prep, and repairs. Subtract the capital gains tax, figured on recorded basis. Price the southern home on the same net basis, including the insurance quote on that exact address and a year of property taxes. Renting in the destination for six to twelve months takes the purchase deadline out of the sale. Retirement income planning should run on that final net figure, since withdrawal rates and portfolio targets are only as good as the number they start from.
The document to ask for before listing is the agent’s net sheet. It’s a line-by-line estimate of what the seller actually walks away with after every cost, turning a vague sense of equity into a number that can carry a retirement plan.
Contact [email protected] for any questions or corrections.
David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
