Selling a home costs money too – did you know that? Yes, even though you aren’t the one getting the mortgage or eve buying the home, sellers have costs they must pay too. It may surprise you to learn that sellers closing costs can be as much as 10% of the sales price.
What’s different, though, is how you pay them. Buyers have to come to the closing with the cash in hand. Sellers, on the other hand, have the money deducted from his or her proceeds from the sale of the home.
What closing costs do sellers pay? Keep reading to find out.
The government charges certain fees to transfer a home to another person. Buyers pay some of the fees, but sellers pay too. Sellers pay:
- Recording fee
- Tax service fee
- Real estate taxes
The recording fee and tax service fee are typically an average of 2% of the sales price. The real estate taxes vary by location and due date. Sellers must pay their portion of the property taxes, since property taxes are paid in arrears. The closing agent will determine how many months of the year you resided in the home and determine the prorated amount of property taxes you owe.
Title Insurance Fees
The buyer must pay for the lender’s title insurance, but sellers pay for the owner’s title insurance. When you bought the home, chances are the seller paid for your owner’s policy. Now that you are selling the home, you must pay them for the new owner.
The owner’s policy protects the owner against any liens that went unnoticed prior to the transfer of the deed. It also protects the buyer against any homeownership claims that anyone may come forth with in the future. Title insurance for owners typically costs between $1,000 and $2,000.
The title company will do a title search on the property before it transfers hands. The title search uncovers any existing liens against the property. Aside from the loans you’ve disclosed, you will be responsible for clearing up any other liens against the property if they exist.
For example, if a contractor put a lien on the home for unpaid work they did, you must clear it up before the home can transfer hands. The buyer’s lender won’t allow the loan to close unless the liens are cleared.
Property debts, as discussed above, include liens, which could include:
- Unpaid homeowner’s association dues
- Unpaid property taxes
- Collections or judgments that became a lien on the property
It’s always a good idea to have an attorney oversee the transfer of real estate. Of course, you’ll need to pay the attorney for the service. The attorney can oversee the purchase contract and any other work that goes into the process to make sure everything is fair for you.
Every attorney charges different fees, but it’s a good idea to shop around. Use referrals from friends or family that have used a specific attorney with good luck before, but be cognizant of the fees. The depth you use the attorney for will also determine the fees.
Finally, we have the largest fee – the realtor fees. The seller pays for the entire realtor fee. This includes any commission paid to the buyer’s realtor. How much you pay will depend on what you negotiate. On average, realtors get around 6% of the home’s sales price. If you are good at negotiating, you may get that fee lower.
Your realtor will have an agreement with any buyers’ realtors that come through. Upfront, the selling realtor will tell buyers’ realtors how much commission they will earn. Sometimes it’s a 50/50 split, but not always. The realtors can work out those details, but just know that the entire commission typically comes from the seller.
Sellers pay closing fees, but they come out of the proceeds of the home. You should still make sure you can afford the fees and that they are representative of the area. Don’t get duped by excessive fees for selling your home just because you didn’t pay attention. Even though you don’t pay the fees directly, they do come off the profits of the sale of your home and affect your bottom line.