What closing costs sellers pay?
Are you thinking about listing your house for sale? While you will be understandably looking to reap a considerable profit , have you factored in the closing costs you have to pay as a seller? How much money you will end up as profit on the sale of your home will depend a great deal on these closing costs.
While buyers also pay closing costs, sellers have their own set of costs they have to consider. Here is a list of some of the fees that you, as a seller, are expected to pay:
1. Commission to the real estate agent: It is the largest part of the entire closing cost paid by the seller. While the commissions can be negotiated and may vary by the market conditions to some degree, a typical real estate commission fee would be 6 percent of the sales price of the home. This amount is divided between the seller’s agent and the buyers’ agent.
2. Loan payoff amount: It is the cost that you owe your lender to pay off your mortgage loan and it is mostly higher than your current loan balance, which is the amount you owe as of the date of your statement. You don’t actually pay the interest on your mortgage loan in advance but at the end of every month. In fact, if you are planning to pay off your debt early, you may have to pay a pre-payment penalty. These pay off costs will also require you to pay any interest you owe through the day you plan to pay off your mortgage loan.
3. Property Transfer taxes: These are the taxes imposed on the transfer of title from one entity to the other. Transfer taxes are levied by your state or local government and the charge may vary from state to state.
4. Title insurance fees: Some states require that the seller must be able to provide title insurance policy to the buyer. Title insurance protects the property owners as well as lenders against any loss or damage due to a defect in the title of the property as a result of any frauds, outstanding liens and improper documents that may create a conflict in establishing the ownership. The cost of the insurance policy vary from state to state and largely depends on the market value of your property.
5. Attorney fees: If you choose to have your own attorney to represent you at the closing, you will have to factor in the attorney fee that you will either pay as a fixed price or by the hour.
6. Homeowner association fees: You will be required to clear all the pending homeowner association dues. Some homeowners associations charge yearly dues so you will be required to pay the prorated home associated due that you owe up to the settlement.
7. Property taxes prorations: These are the portion of the taxes paid yearly. If you happen to close the transaction near the end of the year, be prepared to pay the next year’s taxes.
There are some miscellaneous closing costs that the seller may have to consider:
- Home inspection costs that may include termite, fire or any other type of inspection. It may also include remediation costs if problems are revealed during the inspection.
- Home warranty costs. Home warranty guarantees that all the mechanical and electrical gadgets are working on the closing day and even guarantee that these appliances will continue to work without any problems for the specified time as settled in the contract.
- Repair or home improvement bills to make your home attractive to potential buyers.
- Sellers sometimes have to offer concessions or closing cost contributions to sweeten the deal and sell the house quickly. This is not a part of a closing cost but it must be considered to calculate your bottom line in case you are offering any seller concession.
Do these closing costs come as a surprise? Long before the closing, your lender must provide you a Good Faith Estimate that lists all the estimated charges you will be expected to pay. You must make sure that this estimate tallies with a HUD-1 settlement statement, a final updated list with all the closing costs which you will receive just before the closing.
Closing fees can vary from place to place even within a same city. So, it is always a good idea to consult a trusting real estate agent to get a better understanding of what it may entail and how it may affect your profits on the sale of your house.
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