Once you’ve accepted an offer on your home, you can expect a nice profit. But then there are all the closing costs that you have to pay. Closing costs for a seller can be around 6-10% of the selling price.
On the plus side, unless you have very little equity in your home, the closing costs will simply be deducted from the proceeds of the sale of the house. You always spend the money, but since it never reaches your bank account in the first place, losing it can hurt a little less.
You and the buyer will receive a closing disclosure three days before the effective closing. This will present all the details of the sale with actual numbers, so that you will know how much everything is costing and have the opportunity to correct any mistakes.
Here’s an overview of common closing costs for sellers, along with tips on how to reduce them.
Real estate agent commissions
Realtor commissions are the biggest closing costs a seller typically pays.
It is common for the seller to pay the commission for both the listing agent and the buyer’s agent. This is usually a 6% impact on your bottom line, with 3% of the selling price of the house going to each agent involved in the transaction. On a sale of $ 250,000, this would equate to $ 15,000.
To reduce this cost, you can decide to take the ‘for sale by owner’ approach, although you still have to pay the buyer’s agent. You can look for a discount agent, but be aware that their low commission may come with less service. If you are selling in a hot market, your home has a particularly high value or your listing agent is also helping you buy your next home, you may be able to negotiate a lower commission.
that of the lender title insurance policy is another closing cost that a seller can expect to pay.
Before a sale, a title search is done to verify ownership. In some states, a real estate lawyer is also necessary to review the title. A title policy protects the lender (and the new home buyer, if they choose to purchase their own policy) from unexpected property claims that might arise.
While not common, a property claim can trigger legal disputes – and the significant attorney fees that go with them. You can’t lower the cost of title insurance, but its price is probably worth the potential trouble it could save you.
Taxes and fees
Which party pays which fee may be negotiable, but the precise costs of many filing and registration fees or transfer taxes are determined by state or local jurisdiction. Sellers will often be required to pay the property or deed transfer tax.
Property taxes, as good as owners association costs, will likely be shared with the buyer (unless you, as the seller, agree to cover them). These are normally prorated based on the closing date. So, for example, if you closed on the 15th of the month, as the seller you would be hooked from the first to the 14th. As the new owner of the house, the buyer would take the note from the closing day.
Taxes and fees are generally non-negotiable, although in a particularly hot environment sellers market you may be able to get a buyer to bear a greater share of the costs. But since who pays these fees can be defined by local laws, you’re unlikely to escape those that the government considers the seller’s responsibility.
In a buyer’s market, or just to close the deal, you might agree to pay a portion of the closing costs. This is called a seller’s concession, seller’s contribution, or seller’s credit – these terms all mean the same thing. Agree to cover the cost of any necessary repairs found during the home inspection is a joint seller’s concession.
If your buyer is not pay in cash, the total amount of concessions given to sellers may be limited by the type of home loan they use. For a conventional loan on a single-family home that will be a primary residence, the seller’s concession limits vary from 3% to 9% depending on the buyer’s down payment amount and whether he receives closing cost assistance from other sources. Loans guaranteed by government agencies, such as the Federal Housing Administration, have their own limits on concessions from sellers.
Other fees for door-to-door sellers
While this isn’t exactly a closing cost, it’s important to keep in mind that unless you own your home, a significant portion of your profits will likely go towards paying off your home. current mortgage. You may have to pay fees to prepay your mortgage. Look at your mortgage documents to see if you have a prepayment penalty.
If there are any liens or judgments against the property, you will need to pay them off before you can sell it. These can be discovered in the title search.
Finally, if you have a second mortgage, like a home equity loan or one Home equity line of credit, these will have to be paid in full before they can sell. (These may also be subject to prepayment penalties.) Since these loans are secured by the property, you cannot continue to borrow if you no longer own the home.