Planning To Sell This Year? Don't Forget To Factor in These Closing Costs

If you're thinking about selling your home this year, you’ve probably been monitoring its value for a while so you can sell and still get a substantial profit. But before you start counting how much money you’ll make, don’t forget to factor in seller closing costs into the sale price.

 

 

Let's take a closer look at closing costs and an overview of the fees that will be deducted from your overall profit.

 

 

“Closing costs” is a catchall term for the various fees and expenses you must pay upon closing or completing a real estate transaction. These can include various fees, expenses, and charges, which are split between the home's buyer and seller. These fees do not include realtor commissions.

 

The exact fees can vary depending on your location and the house’s cost. But in total, closing fees can add up to around 2 to 5 percent of the home’s sale price, according to Freddie Mac. Sellers usually take these costs out of their sale proceeds (unless you specifically ask to pay them separately), while buyers need to pay them upfront.

 

 

Most states or local governments charge some form of transfer tax. According to Bankrate, a real estate transfer tax, also sometimes called a deed transfer tax or documentary stamp tax, is a one-time tax or fee imposed by a state or local jurisdiction upon the transfer of real property.

 

In other words, it's a fee that you’ll pay when the title for the home passes from you to your buyer upon closing. The cost varies widely by location but is typically dependent on the home’s sale price. Also, take note that not every state has this tax.

 

In most markets, it is the seller who pays for the owner’s title insurance, which protects against potential ownership issues. It’s a one-time payment that protects the future owner from the financial burden of sorting out title issues in court, whether they arise at closing or years down the road.

 

Costs can vary from a few hundred dollars to $1,500 or more.

 

 

In some states, home sellers are required to have a real estate attorney to help them with the transaction. The transaction cannot legally close without one. And even when it isn’t mandatory, many choose to hire one to ensure their interests are protected.

 

Since markets also vary, in some areas both the buyers and sellers have their attorneys, while in others, it’s common to have one settlement attorney for the real estate transaction. Their fees range significantly — anywhere from $150 to $350 per hour, or it could be a flat fee depending on what they do for you.

 

Funds are usually held in escrow during the course of a real estate transaction, which means there will likely be fees owed to cover the services of the escrow company.

 

This independent third party not only handles the money that’s being exchanged between the seller and buyer but also manages the signing and recording of the closing documents. The amount varies by state but can range from $300 to $700, or sometimes more.

 

Property taxes must be up to date before you hand over the keys to the buyer. When you sell your house, you'll be responsible for prorated property taxes due up to the date of the sale.

 

If you still have a mortgage on the property you’re selling, the remainder of that loan will need to be paid off before the sale is finalized. In some cases, your lender may require a prepayment penalty.

 

If your home is part of a homeowner’s association, HOA fees must be paid up to date by closing day. Some HOAs also charge a transfer fee to the new owner.

 

In a buyer’s market, sellers may offer to pay some of the buyer’s closing costs to help close the deal. This is also known as seller credit and may include repairs after inspection.

 

Seller concessions may be limited depending on the buyer’s loan type, especially government-backed loans such as FHA loans.

 

 

Closing costs are due at the time of closing. These fees are deducted from your sale proceeds, so you typically won’t need to bring cash unless your home is underwater or you choose to pay separately.

 

You will usually receive a settlement statement about three business days before closing, which outlines all closing costs. Some agents also prepare a seller’s net sheet to estimate your final proceeds.