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S – C = NP
S = Sale price
C = Costs and related expenses
NP = Net proceeds
Net proceeds refer to the amount of funds remaining for the seller after an asset (e.g. real estate) has been sold and all costs have been accounted for.
This is the amount in which a seller would receive after a deal has been closed.
In some cases, such as a foreclosure auction, the net proceeds would go to a third party instead.
For a regular home sale, some items commonly found in closing costs include:
- Legal fees
- Title fees
- Survey charges
- Home inspection
- Property tax
- Agent commissions
When expenses has not been deducted, the figure is known as gross proceeds.
For the calculation of capital gains tax, the net proceeds are used instead of sale price or gross proceeds.
Net proceeds should not be confused with profits as the latter is an accounting term.
It is possible for net proceeds to be $100,000 and profit to be $50,000.