How is net proceeds for a seller calculated?

• A. Sale price minus mortgage payoff and taxes.
• B. Estimated sale price minus selling costs (commission, legal/title) and adjustments (taxes, utilities, mortgage payoff).
• C. Only the listing price.
• D. Net proceeds equal to asking price.

Answer: (B)

Net proceeds are what the seller actually takes home after all sale-related costs and obligations are settled. To estimate them, start with the expected sale price and subtract what must be paid out at closing: selling costs (such as the real estate commission and legal/title fees) and adjustments (items that affect the seller’s bottom line, including prepaid or accrued taxes, utilities, and the mortgage payoff). This approach accounts for the real money the seller receives, not just the listing or sale price.

For example, if the sale price is $350,000, selling costs total $25,000, and adjustments (mortgage payoff plus taxes and utilities) total $203,400, the net proceeds would be $350,000 minus $25,000 minus $203,400, which equals $121,600. This illustrates why subtracting both selling costs and adjustments from the sale price gives the correct net proceeds.