If you’re thinking of selling your house, keep in mind that closing costs aren’t just for buyers. Sellers are also responsible for a number of closing expenses, which you can factor into the selling price since the majority of them would be excluded from the profit on your house.
According to Zillow.com, closing costs for sellers can vary depending on local tax laws and other conditions. However, you can consider paying between 8% and 10% of the home’s selling price at closing. It’s important to be aware of these possible costs in order to grasp your responsibilities as a seller and prevent unforeseen problems at closing.
Below are the 7 most common closing costs for sellers:
Real estate commissions are one of the most important closing costs to consider when selling your house. A standard fee is between 4 and 6% of the home’s selling price, divided equally between the selling agent and the buyer’s agent.
The real estate commission is typically the largest charge a seller receives, although there is a greater risk if you opt to For Sale by Owner (FSBO) rather than hiring an agent. Since selling a home is such a complex task, it’s best to have a specialist by your side who can walk you through each move to ensure you get the most money from the sale of your most valuable asset.
Real estate commissions differ by sector and can be negotiable if you make an agreement with your selling agent right away.
Another cost to consider when selling your home is title insurance. The buyer’s title insurance premium is usually paid by the seller as part of the closing costs, and the rate varies from state to state and is often dependent on the home’s selling price.
If there are problems with the title to your house, title insurance covers both the current buyer and the seller. This one-time payment saves the buyer from the financial burden of resolving title disputes in court, if they occur at closing or further down the road, whether there is anyone else who may assert ownership over the land, either because of a conflict over the property or because of unpaid liens from lenders, owners, or the state.
A transfer tax, also known as a title fee or a state transfer tax, is a tax that you must pay when the title to your home is transferred from you to the buyer at closing. It is one of the most important costs associated with property transfers. The amount of tax is dictated by state legislation, so the price varies greatly. This cost is also one of the key reasons why getting the right calculation of closing costs is difficult, so researching it before closing the sale can be beneficial.
In certain countries, having a real estate lawyer handle the closing and settlement of the real estate transaction is mandated by statute. Lawyer fees must be factored into closing costs if you have your private attorney to represent you while selling your house.
Even if hiring an attorney in the country where you reside is not necessary, you might need to do so if you are concerned with complicated transactions involving distressed assets or acquired real estate.
An escrow account is a third-party account that protects both the sellers and buyers by preventing either party from taking the other’s assets. Escrow can also be compared to a savings that protects the earnest money deposit. The filing and documenting of the closing documents and deed, as well as the keeping of all the purchasing funds, are all included in the escrow fees. Fees for transferring money, copying records, and notary services may also be needed.
Escrow fees typically range from $500 to $2,000, or around 1% to 2% of the home’s selling price. Escrow fees are normally divided 50/50 between the seller and the buyer.
Property taxes, which vary greatly from state to state, are a necessary part of owning a home. Typically, property taxes are charged in advance from an escrow account linked to your loan.
When you sell your property, you’ll be liable for prorated real estate taxes up to the termination date, when the buyer or new owner can take over. Be aware that you will be required to pay real estate taxes at closing in order to bring your account current.
If you live in a community controlled by a homeowners association (HOA), you might be required to pay HOA wage bill in addition to the other closing costs stated above. When a property is moved from one owner to another, there are common fees that can apply. The costs of processing paperwork, sending out HOA rules to new owners, working with estate inspection reports, renaming in homeowner records, updating passcodes, developing new security cards, and other fixed costs are all covered by transfer fees.
But apart from transfer fees, you may need to pay some money at closing to ensure that you’ve paid all of your bills up to the closing date, same as with real estate taxes.