What are Net Proceeds?
Net proceeds refers to the amount of money remaining after an asset has been sold and related expenses have been paid.
How Do Net Proceeds Work?
For example, a homeowner sells his house for $100,000. After deducting real estate agent fees and closing costs of $10,000, his net proceeds equal $100,000 - $10,000 = $90,000.
This can also apply to selling stocks and other assets, where the expenses might include broker and other transaction fees.
Why Do Net Proceeds Matter?
Whenever an individual or business sells assets, it's important to make sure net proceeds, not gross proceeds, are being maximized. This means that perhaps the best sales price is not the highest price. The highest price does not always reward the seller with the most net proceeds. Transaction costs must be scrutinized as closely as the selling price -- if not more so -- since these costs are often hidden or obscured.
