When the time comes to sell your home, you might be wondering what the typical closing costs are. You and the buyer will pay closing costs but what you pay for differs. Let’s look at what you can expect to pay at closing when you sell your home.
My family was in charge of selling my grandfather’s home recently. It sold for just under the asking price of $209,900. After closing costs were deducted, a slight drop in price was agreed upon, and a 2-year whole home warranty was purchased for the buyer, we walked away with just over $180,000. You may not have to lower the price or offer a home warranty, but you can expect to pay 8-10% of the sales price of your home in closing costs. Here are the primary closing fees to be aware of:
- Transfer tax
- Escrow and closing costs
- Prorated property taxes
- Title insurance
- Credits toward closing costs
- Attorney fees
- HOA fees
Agent commissions typically run between 4-6% of the sales price. Not only do you pay your agent’s commission but the commission of the buyer’s agent too. Commission rates are negotiable but discuss them when you first hire a real estate agent and get them in writing.
Sometimes called government transfer tax or a title fee, transfer tax must be paid when the home title passes from you to the new homeowner. This tax varies by state and ranges from less than $100 to many $1,000’s depending on the price of the home.
Escrow and Closing Fees
Escrow, a third party provider who holds the money and paperwork for the sale of your home, also charges you at closing. To manage the closing of the transaction, escrow providers charge a flat fee ($500-$2000) or approximately 1% of the home sale price. This fee covers the signing and recording of the closing documents and the deed, the holding of all purchase funds, as well as office expenses, notary fees, and other miscellaneous charges.
Prorated Property Taxes
In order for the buyer to take over the property taxes, you’ll need to prorate them up to the date of the sale. Depending on the time of year, you may end up paying some money at closing to bring yourself up to date.
If there are issues with your home’s title, the new owner needs title insurance to protect themselves. If someone were to sue because they have a legal claim against the property, owner’s title insurance would protect the homeowner from financial loss. Your lender will insist on title insurance to protect their interest in the loan. Title insurance prices range from hundreds to $2,000.
Credit Toward Closing Costs
Want to make your offer more appealing to buyers? With a lot of homes on the market you could stay competitive by offering credit toward closing costs, also known as a seller assist or seller concession. This gift appeals to buyers because it can cover part of their closing costs.
Depending on your state, you may be required by law to have a real estate attorney oversee the sale of your home. Attorneys are of great assistance when it comes to helping understand contract terms, negotiations, executing closing paperwork, and they can help you avoid mishaps. Expect to pay your real estate attorney up to $1,200 as a flat fee or $150 - $350/hour.
When you sell your home you will pay a variety of closing fees that amount to 8-10% of the final sale price. This article illustrates many closing fees but there may be others including HOA fees or survey costs. As you prepare to sell your home, rest easy knowing you have a good understanding of what you’ll be paying in closing fees.