If you are selling a home, you probably don’t give a second thought to closing costs. You assume that you can keep whatever profits you make beyond what you owe to pay off your mortgage. Unfortunately, there are fees you are responsible for paying, even though you are the one selling, not buying the home.
In fact, sellers can pay between 5 and 10 percent of the home’s selling price in closing costs. Unlike the buyer though, you don’t have to come up with the money in cash. Since you are selling your home, the closing agent will deduct your fees directly from the proceeds of the home. You just walk away with less cash in hand.
Paying the Realtor
The largest fee sellers pay is the realtor’s fee. It’s the seller’s responsibility to cover this fee for both the buyer and seller. You can expect this fee to be around 6% of the sales price of the home. Of course, you can negotiate a lower price if you are willing to do so. It will likely depend on the market, the price and condition of your home, and whether the agent will have to split the commission.
If you are selling a $250,000 home, you can expect to pay as much as $15,000 in commission costs. This covers both the buyer and seller agent’s fees, though. Usually both agents split the commission 50/50, but the agreement your agent(s) have may differ. Make sure you read the fine print in a realtor’s contract before deciding on a realtor so that you know exactly what you’ll owe if the home sells.
Paying the Government Fees
Sellers also have to pay a few government fees. The two most common are the recording fee and tax service fee. Each state charges a different amount, so how much you will pay depends on your location. The maximum amount for any state is generally 2% of the sales price, though. These fees pertain to the cost the government incurs for transferring your title out of your name and into the buyer’s name.
Paying the Title Insurance Fees
You probably bought title insurance when you bought your home. At the very least, you paid for the lender’s policy, as that’s required in order to get a mortgage. This policy protects the lender against any unnoticed liens or claims of ownership after the title search is completed. If you have an owner’s policy on the property, chances are the person selling you the home paid for that for you. Now it’s your time to return the favor. When you sell your home, you will be responsible for paying the owner’s policy.
Don’t worry, you won’t have to break the bank to buy your buyer title insurance, though. The cost will vary based on where you live, but in general, $1,000 is about average. If you are a ‘plan for the worst’ type person, have a maximum of $2,000 figured into your budget when figuring your bottom line.
Paying the Attorney
You’ll likely have an attorney that will cover the sale of your home, at least it’s recommended. The attorney can help make sure that you are getting a fair shake in the deal. The buyer and seller should both have their own representation too; just to make sure that everyone is equally covered in the transaction.
How much this fee costs you will depend on the attorney you choose and the area that you live. It’s best to secure quotes from several attorneys as well as secure a listing of what they have to offer to ensure that you get the services that you need.
Paying Off Old Debts
As the seller, you are responsible for any remaining debts on the property. For example, if you have any liens on the property, you’ll need to pay those in order for ownership of the home to exchange hands.
You’ll also have to take care of any outstanding homeowner’s association dues, property taxes that will become due for the time you lived there, and any homeowner’s insurance premiums that will also become due. Basically, you’ll pay a prorated amount of every fee that you pay for your home now, including real estate taxes, homeowner’s insurance, and association dues.
Now it’s not set in stone that the seller has to pay all of these things. They are the common fees sellers pay, but you can always negotiate with your buyer if there are fees you would rather they cover. Each real estate transaction is different. The outcome that is best for you might not be the best for the next person. Talk with your tax advisor and/or attorney to help you decide what is right.Click to See the Latest Mortgage Rates»