Net proceeds from the sale of a house: How much do you really make?

When listing a home on the market, the amount of money you’ll ultimately pocket from the sale is often top of mind. The money a home seller keeps after all fees, commissions, closing costs and other expenses have been paid is referred to as net proceeds.

The exact amount of net proceeds a seller might earn is hard to calculate until an offer has been accepted. It is possible, however, to get a general idea of what the net proceeds from your home sale will be.

Net proceeds definition

As the name implies, net proceeds in real estate is the money a homeowner walks away with — or nets — after the sale of the property. The amount is usually less than the home’s actual sale price because of the expenses involved in selling a home, especially if there’s still a mortgage to be paid off.

“Net proceeds is the amount of money a home seller will receive after deducting all of the costs of a sale,” says Ralph DiBugnara, president of Home Qualified and vice president at New American Funding.

The costs associated with a home sale typically include agent commissions, title insurance, attorney fees and escrow fees. Depending on which state the property is located in, there may also be transfer taxes to be paid.

Another big factor that can eat into the net proceeds is the payoff balance on the mortgage. If the seller still owes money on their mortgage, that balance will generally be paid with funds from the sale of the home.

One important note: Net proceeds are not synonymous with “profit.”

“Net proceeds are what you walk away with after all mortgages, liens and transaction costs are paid,” says Greg McBride, Bankrate’s chief financial analyst. “The proceeds include your down payment and any principal repaid, which do not represent profit.”

How to calculate net proceeds from a home sale

The simplest way to calculate net proceeds is to deduct all of the seller’s closing costs, agent commissions and the mortgage balance from the final sale price of the home.

To get a truer sense of net proceeds, however, you may also want to factor in some of the additional expenses associated with selling your home. That may mean including the cost of any repairs or improvements made to the home before listing, as well as the costs of staging your home. All of these fees eat away at the net proceeds earned from a home sale.

Net proceeds example

Here’s an example from DiBugnara of the net proceeds resulting from a home sale:

Tax implications

Depending on the type of property you sold and what your plan is for the money earned, your net proceeds may trigger a tax event. The impact to your taxes will depend on many factors: your tax bracket, of course, but also your marital status, how long you’ve owned the house and whether or not it was your primary residence.

Current laws allow the first $250,000 in profit for single filers, or the first $500,000 for those married and filing taxes jointly, to be excluded from impacting your tax liabilities. To qualify for this exclusion, the IRS stipulates that you must have lived in the home as your primary residence for a period of time that amounts to two years out of the previous five years. (There are exceptions for those deployed as active-duty members of the military, foreign service or intelligence community.) Profits above and beyond that may be taxed as long-term capital gains.

You may however, be able to avoid being taxed if you use the profit from the sale to buy a new home. “If profit from the sale of the home, meaning the difference between what it cost you to buy it and what you sold it for, is invested back into another home, then in most cases you can avoid capital gains tax,” says DiBugnara. “Keep in mind that this reinvestment must be completed in a certain amount of time, usually 90 days to six months at most.”

The way you sell can impact your net proceeds

The net proceeds resulting from the sale of a home can vary significantly based on how you choose to sell the property. “Net proceeds can be impacted by how you sell your home because the costs of selling it can be different,” says DiBugnara. “For instance, if you sell a home on your own, compared to using a real estate agent, it could cost you less in expenses, making your net proceeds higher.”

Let’s compare a few of the most common methods:

• Agent-assisted sales: When selling a home the traditional way, with a professional real estate agent, you can expect to pay that agent a commission. This typically runs between 2.5 and 3 percent of the home’s final sale price — on a $350,000 sale, 3 percent comes to $10,500. Many sellers agree to (but are not required to) pay their buyer’s agent’s fee as well, which amounts to another 2.5 to 3 percent. Commissions aside, selling with an agent is also the best way to get top dollar for your home, which increases your profits.
• FSBO sales: A for sale by owner (FSBO) transaction eliminates the need to pay a listing agent’s commission. But, while you do save that cost, you may also earn less money on the sale. According to data from the National Association of Realtors, in 2024, the average FSBO listing sold for a median of $380,000, while those with agent representation sold for $435,000.
• Cash homebuyer or iBuyer sales: Selling to a company that buys houses for cash brings in proceeds more quickly than a market sale, and with less hassle. However, this approach also tends to result in lower net proceeds for the seller, because these companies typically offer less than market value for homes. In the case of online-only iBuyers, they might also charge hefty service fees. “Since iBuyers need to make a profit on the sale, they rarely make an offer at or over full market value, and their fee structure is often more expensive than an agent’s commission,” says Rick Sharga, founder of the real estate consulting firm CJ Patrick Company.

FAQs

• Are net proceeds the same as profit?

  Not exactly. Profit would be new funds earned, whereas net proceeds account for funds previously laid out, which you’re now getting back. As McBride explains, “Net proceeds are what you walk away with after all mortgages, liens and transaction costs are paid.” That includes your down payment, for example, which does not represent actual profit.

   

• What is the difference between net and gross proceeds?

  These terms are often confused, but they represent different amounts. Gross proceeds are the total amount that the seller receives from the sale of the home. Net proceeds are the amount that the seller actually pockets after paying the mortgage balance and various closing costs.