In order to talk about the difference between net proceeds, gross proceeds and why the difference matters, we firstly need to define the terms “net proceeds” and “gross proceeds”.
If you are a seller of any sorts, your gross proceeds are the amount that you receive from the sale of your asset. Your net proceeds is the amount of monetary compensation that remains after you pay for the added expenses.
In other words, in order to calculate net proceeds, you need to subtract your added expenses from your gross proceeds, and that’s your net proceeds. Your added expenses in this case would be any added money that you needed to spend in order for the sale to happen.
For example: renovating, marketing, realtor commission, closing fee, any remaining mortgage, etc. When selling a house or any kind of property, knowing how to calculate your net proceeds is of utmost importance.
If you don’t know the difference between your gross proceeds and your net proceeds, there is a high chance that you won’t maximize your potential profit from your sale. Therefore, we are going to dive deeper into these topics to achieve a comprehensible explanation.
Selling a House and Net Proceeds
Let’s paint a picture: you are a homeowner and you want to sell your house. In this situation, the price for which you are selling your house is your gross proceeds. For the sake of this example, let’s say that you are selling your house for $300,000.
The next step is calculating what your expenses will be while selling this house. During this phase, you need to ask yourself if the property needs added investments or if you need added services from professionals; such as realtors.
Once that part is done, you will have an estimate of what your net proceeds will be. You might sell your house for $300,000 but your added expenses could total up to, let’s say, $50,000. This would mean that your net proceeds or your profit would be $250,000, before the capital gains tax is applied.
If you don’t have to do any renovations, and find a buyer who is offering $280,000 without a realtor or closing fee, your net proceeds will be $280,000 before capital gain tax. In other words, the less you spend on the added expenses, the higher your profit or net proceeds will be.
The Importance of Net Proceeds
The reason why understanding net proceeds is so important is because if you don’t understand them – you might miss your chance on higher net proceeds, i.e. more money in your pocket.
When you start receiving offers for the property that you are selling, you need to pay attention to what your potential net proceeds are going to be, rather than paying attention to the price that is being offered to you. Let’s illustrate this with another example.
You are still selling your property for $300,000. You have received an offer for $310,000 however, the potential buyers insist on some renovating and a realtor needs to get involved. Another set of potential buyers offers to pay $280,000 without any renovations or realtors involved. Where do you think that you will have the highest net proceeds?
Boost Your Net Proceeds
By now, you can conclude that the greater your net proceeds are – the better it is for your financial situation. What does that entail, for you – a homeowner who wants to sell their house for the highest possible profit?
Let’s think again of the formula that calculates your net proceeds. We deduct your added expenses from your gross proceeds. This means that the easiest way for you to boost your net proceeds is by cutting down your added expenses. Which prompts the question “How do you cut down your added expenses?”.
Time is the most valuable asset that we have. This is why people often say that time is money, and others say that time is even more valuable than money since it’s the only resource that we can never get back.
We all know what it feels like to have a set plan in mind, only to see our own plan slowly disintegrate in front of our eyes. This can happen due to miscalculations, circumstances that have changed or that we can’t control, or because of something unexpected; like a pandemic, for example.
How To Sell Your House for the Highest Profits?
Selling a house is by no means an easy job. It can be incredibly time-consuming, sometimes even frustrating and demanding. Not all people have the luxury of having the time or the resources to polish up their property. Some are in need of a quick sale, yet selling a house or any kind of immovable property can (sometimes) be a lengthy process.
The property that you want to sell might have been a part of a family inheritance, but you simply don’t have the time or energy to deal with selling it. Or you’ve been trying to sell your property and continuously investing money in it, without receiving many offers.
If you are someone who doesn’t have the time, the resources, or even the patience to deal with renovations, potential buyers, and so on, local companies that buy houses and restore them are an ideal solution for you.
Find a company that is focused on contributing to communities, as well as their development, and on making your life easier. They can make sure that you don’t have to depend on a buyer or even any kind of middle man. This means that you will be able to have higher net proceeds and more time and energy on your hands. No stress, no mess, just profits.
Your time is valuable. Look for someone whose business model is flexible, fast, and focused on offering you the best deal possible. You want a buying process that is direct, simple, swift, and doesn’t require any extra fees or reparations, all while giving you, the seller, a top-dollar offer.