Net proceeds are the cash that's left after -- or net of -- the transaction costs associated with a sale. These costs often exist when there is a formal transfer of ownership, such as when you're selling a car or a house. There are usually no such costs for more informal purchases, such as selling your used television at the community flea market.
- Skill level:
- Moderately Easy
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Calculate the transaction costs for selling your car. You may have paid for a classified ad. You may also have to pay to have the vehicle inspected by an authorised garage and road-tested before the motor vehicle bureau will transfer the registration.
Calculate the transaction costs for selling your home. These could include the mortgage balance repayment, listing agent commissions, land transfer tax, lawyer's fees and security deposits. Mortgage brokers, banks and others often provide free online tools, such as calculators, to estimate how much these transaction costs would be, and thus what the net proceeds would be.
Calculate the transaction costs for selling other items. For example, you would pay brokerage commissions if you are selling your shares in the stock market. There would be advertising costs if you list your used refrigerator for sale in the classifieds.
Calculate the net proceeds by subtracting the total transaction costs from the selling price. For example, if you sold your car for £650, and all your transaction costs add up to £97, then the net proceeds are equal to £552.
Tips and warnings
- The cash a company gets back after paying underwriting commissions and listing fees are the net proceeds from the sale of its shares or bonds.
- A government agency or department incurs transaction costs when it disposes of surplus or used property such as office furniture and computers. These costs include warehouse rentals, advertising and overtime. The net proceeds would then be equal to the total selling price minus these costs.
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