First Person: There’s More to Home Appreciation Than Just Purchase and Sale Price

Yahoo Contributor Network

It really bothers me when I watch home shows on television where they flip properties or even just sell a regular home, and then they tout how much they made. Something along the lines of, "We bought for $200,000 and sold for $250,000 three years later, so we made $50,000!"

Wait, wait, wait…

In home ownership, it doesn't really work like that. I mean, sure, if we want to sugar-coat things, then yes, the sales price is $50k over the price paid, but that doesn't necessarily mean that the seller made $50k on the home over time. There are just too many extras involved. I was playing with a neat little "Was my home a good investment? calculator at CNN Money the other day and it got me thinking more about how a lot of people just don't factor in all the other costs of owning and selling a home that can cut into potential "profits".

Here are some of the costs that have tacked tens of thousands of dollars onto our cost of home ownership and certainly added to the price we paid to live in our most previous home.

Repairs and Maintenance

Some people consider repairs and maintenance just a part of home ownership. That's fine and dandy, but it can be a costly part of home ownership. Repair costs can often run 2 percent of a home's value annually. This means that for a $200,000 home, there could be a $4,000 repair and maintenance bill each year. This amount can cut a pretty good hunk out of any appreciation a home might be gaining…if it's gaining at all.


Insurance might not be the biggest cost involved in home ownership, but it can be there each and every year. According to, the average annual cost of home insurance countrywide in January 2013 was $917.12.

Property Taxes

According to, the average US median property tax cost in 2010 was $2,043, and property taxes comprised about 1.14 percent of a home's value. It's important to note though that the location of a home when it comes to state, county or even just neighborhood can significantly affect how much property taxes are. In our area of Chicagoland, we were paying nearly $5,000 a year in property taxes and this wasn't considered abnormal.

Broker Commission

Having to pay 5 or 6 percent in real estate broker commission every time we sell a house has probably hurt our pocketbooks just as much as the annual fees commonly associated with things like our retirement accounts. At first glance, 6 percent commission might not sound like a lot of money, but figuring that this equates to $12,000 on a $200,000 home -- and that this fee is typically present every time a real estate agent is used to sell a home -- and it turns out that it can be quite a chunk of change especially if multiple homes are bought and sold over time.

Mortgage Interest

Depending upon the loan amount, interest rate, and length of loan, interest upon a mortgage could end up adding tens or even hundreds of thousands of dollars to the costs of home ownership. Not only this, but depending also upon the amount put down upon a home, mortgage insurance could come into play as well adding even more to the costs of a loan.

When all the aforementioned costs of home ownership are added up over time, that big chunk of profits might not be looking so big anymore. In fact, there might not be any true profits at all after pulling out such costs. While I guess such a determination might all be in the eye of the beholder and what one considers the "carrying costs" of owning a home, personally, I think it's important no matter how you're doing the math to consider all the costs that go into home ownership.

*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

More From This Contributor:

5 Websites that Could Save You Money

How I Differentiate My Blog

Preparing to Publish My First E-book


The author is not a licensed financial or real estate professional. The information provided in this article is for informational purposes only and does not constitute legal, financial or real estate advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.


View Comments (19)