Calculating profit on home sale (sales, rental, mortgage)

[nitynity]

If I buy a house for 200k and pay off 50k on mortgage while I live there and later sell it for 210k. So now I owe only 150k on mortgage and the profit will be 60k. Or will it be only 10k since the original purchase price was 200k and I was making the payment out of my pocket monthly? What's the standard when calculating the profit?

If the latter scenario is the case, then even if I sell it for 155k, there is profit of 5k though I paid 200k. Doesn't it sound weird or is it normal?

[Iggier]

The mortgage has nothing to do with profit. The difference between the purchase price and sales price is the profit, or loss.

[nitynity]

Originally Posted by Iggier

The mortgage has nothing to do with profit. The difference between the purchase price and sales price is the profit, or loss.

Thanks for the response Iggier. That's what I thought as well. But my Realtor came up with the net profit story based on my remaining mortgage balance and that doesn't make sense to me.

[davebarnes]

Originally Posted by nitynity

my Realtor came up with the net profit story based on my remaining mortgage balance.

Fire your agent.
He/She is a moron.

IRS Taxable Profit = Net Sales Price - Basis Cost
You need to understand what basis cost is.
How to Define Cost Basis: 5 Steps (with Pictures) - wikiHow

[Iggier]

Yeah, I was going to mention the cost basis bit in my reply to the OP, but left my response simply as the difference of purchase price vs. sales price so as not to further confuse.

I'll bet the OP is looking to sell existing and purchase another property and the realtor is trying to pull a fast one regarding true cost/affordability of the potential purchase. I've seen realtors do this time and time again. Seems the OP has the smarts to question.

[nitynity]

Originally Posted by Iggier

Yeah, I was going to mention the cost basis bit in my reply to the OP, but left my response simply as the difference of purchase price vs. sales price so as not to further confuse.

I'll bet the OP is looking to sell existing and purchase another property and the realtor is trying to pull a fast one regarding true cost/affordability of the potential purchase. I've seen realtors do this time and time again. Seems the OP has the smarts to question.

Thanks Iggier. I know it's too late and nothing that could be done at this time.

Purchase price was 275k + closing cost = 282k loan amount.
Sales price = 320k.

According to my math,
Profit = 320k - 282k - 25k(other expenses like commission, title etc.) = 13k

According to Realtor,

Net Profit = 320k - 260k (remaining mortgage balance) - 25k = 35k

Am I really making 35k or 13k? i guess I don't have a choice regardless...

[davebarnes]

Originally Posted by nitynity

Am I really making 35k or 13k?

Probably neither one.
You need to get educated.
Fast.
And, fire the agent.

[nitynity]

Originally Posted by davebarnes

And, fire the agent.

Unfortunately I don't think that's an option since the house been on market since Jan(it was overpriced, thanks to Realtor again). I moved to Dallas and renting an apt now. So I need to get rid of this house ASAP.

Also what do I gain from firing him? The sales price is not going to change anyways.

[Hollytree]

What are you calculating your profit for? Just to know how much you've actually made? Surely not for IRS purposes if it's a primary residence. When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes.

If you're checking to see what you've made just to see if you've made money or lost it, it's more complicated. You'd have to take purchase price from selling price plus all the money you've spent on improvements, repairs, property taxes, etc. From that you'd also subtract transaction costs & mortgage. Don't forget the down payment which can come back to you- but that was yours in the first place. In the end, you could easily end up with a net profit if your area appreciated. If it's a wash, that's OK too if you factor in that rental costs would have been a total loss over the same period.

[2bindenver]

For goodness sake, call the title company on Monday and ask for a preliminary HUD.

You are responsible for the asking price and you are responsible for accepting the offer.