As a first-time home seller, you know how much you owe on the mortgage, and you have a good idea of your home’s market value. But then there are all the closing costs for which you are responsible.
Unlike buyers, sellers usually have to pay realtor commissions and title insurance. In all, closing costs for a seller can be around 6% to 10% of the selling price, according to Realtor.com.
Real estate agent commissions
Let’s start with the single most important closing cost a seller typically pays, other than paying off their current mortgage: the real estate agent’s commissions.
It is common for the seller to pay the commission for the seller’s and buyer’s agents. This typically represents a 6% impact on your bottom line – 3% of the selling price of the house to the agent on either side of the transaction.
“It is common for the seller to pay the commission for the seller’s and buyer’s agents.“
On a sale of $ 250,000, this would equate to $ 15,000.
And it doesn’t help to have just one agent involved in the sales process. A single real estate agent will expect to receive the full 6% commission.
Sure, you can negotiate a fee when you hire an agent, but it’s too late to make deals when you’re sitting around the closing table and handing out big checks.
Title insurance policy
Other closing costs a seller might expect to pay is the lender title insurance politics, says Tyler Lee, CEO of Bay National Title in Clearwater, Fla.
Before a sale, a title search is done to verify ownership. A title policy protects the lender (and the new home buyer if they choose to purchase their own policy) against unexpected property claims that may arise against the property. While not common, a property claim can trigger legal disputes – and the costs that go with them.
Closing costs that a seller pays
Any closing costs which are often the responsibility of the seller include:
A property or deed transfer tax.
Any lien or pending judgment against the property.
Repairs required following a home inspection.
Real estate agent commissions.
Additional closing costs are also split between buyer and seller, including property taxes and any owner association contribution.
Read and understand your purchase contract
Closing costs, and whether the buyer or seller pays them, vary widely from state to state – and even between counties in parts of the country.
Which party pays which fee may be negotiable, but many filing and registration fees or transfer taxes are determined by state or local jurisdiction.
And as to knowing for sure what your financial responsibility will be when calculate your closing costs, there is only one definitive guide: the purchase contract.
“Read the contract and make sure you understand what you are paying for,” says Lee. “This is the key.”