Transaction Costs
Categories: Tax
See: Alligator Spread. See: Deadweight Loss.
When you transact, there are costs just for buying the house. Or the stock. Or the whatever. You have the commission you pay to the people who encouraged you to buy. You have closing costs; like...those roof drains have to be cleaned, and oh, what about 12 grand for the termite damage? And taxes.
Bought that house for $200,000 twelve years ago, and now selling it for $500,000? You'll pay $25k ish in commission...say, $20,000 in fix-it closing costs...and then something like $80,000 in taxes if you don't buy another home or qualify for the exemption.
Big money. Big costs. The headline doesn't say it all.
Related or Semi-related Video
Finance: What is Counterparty Risk?9 Views
Finance a la shmoop what is counterparty risk?
alright here's you the party and here's the guy you're contracting with to sell [Woman and man stood side by side]
18 tons of bricks or buy a line of credit for your flower shop or sell a
futures contract with the right to buy oil at 80 bucks a barrel for the next [Person signs contract]
two years so you're the party and he's the counterparty and the yin and yang of
the party and here's the risk yeah well the counterparty risk is just
that the person you contracted with doesn't live up to their end of the
bargain you pay them good money you sign a good contract all lawyered up and [Stack of money and contract appears]
stuff and then they split like totally split disappeared sea men choose the
bottom of the ocean maybe they went to Bora Bora
maybe they got facial surgery in the Philippines you know they do that now [George Clooney in a surgical bed]
well when that happens you will probably feel like crying and you should its your
counterparty you can cry if you want to come on that was a good reference people [Man singing]