Just the Peaks
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Understanding Closing Costs
What You Should Know Before You Sell Your Home
Selling a home comes with its own set of financial considerations, and closing costs can often catch sellers off guard. These charges, which typically range from 8% to 10% of the home’s sale price, include a variety of fees. Understanding them can help sellers navigate the process with greater confidence. In some situations, there may even be ways to reduce the final amount.
This month, Senior Loan Office Sharon Dermer is helping us break down the most common closing costs for sellers and offering insights on managing them effectively.
Let’s dive in…
The 7 Most Common Seller Closing Costs
“Every loan is unique to its specific scenario,” explains Sharon, “and so are the financing products exclusive for its purposes. However, there are some fees and other charges that are very common – especially mortgages.”
Here are some of the most common closing costs that sellers may be responsible for:
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Agent Commission
The largest portion of closing costs usually goes to real estate agent commissions, which range from 3% to 6% of the home’s sale price. These fees cover the services provided by both your and the buyer’s real estate agent. You may also pay additional fees to loan officers, inspectors, and other professionals – depending on the services you request during the sales process.
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Transfer Tax
This is a tax imposed by your state for transferring the property title to the new owner. Costs vary widely by location and can range from $0 (in states like Texas) to thousands of dollars in other markets. You can research your State’s requirements ahead of time to find out what you can expect to pay in transfer taxes.
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Title Insurance
In many areas, sellers pay for the owner’s title insurance policy, which protects the buyer from title disputes. This cost is typically around 0.5% of the home’s sale price. You may have an opportunity to receive an estimate on this cost prior to closing, so you can adjust your budget accordingly.
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Settlement Fees & Costs
Also known as Closing Costs, these fees cover escrow or settlement services, which manage the transfer of funds and documents during closing. These fees vary widely depending on many factors and, while most settlement fees are paid by Buyer, some are paid by Seller.
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Prorated Property Taxes
Sellers are responsible for paying property taxes up to the date of closing. You can find out if you’ll be responsible for any pro-rated property taxes by consulting your local tax schedule. Finding this information out ahead of time can help you stay within budget.
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HOA Fees
If your property is part of a homeowner’s association, you’ll need to settle any outstanding dues. Depending on the policies of the organization, you may also need to pay the HOA to transfer the property to a new owner. Consult the association’s bylaws before selling to avoid any nasty surprises.
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Attorney Fees
In some states, hiring a real estate attorney is required in order to sell a home. Attorney fees can range from $150 to $350 per hour. Though, some attorneys will offer a flat fee for this service. Set aside ample time to shop around in advance, as many law offices tend to have long queues for quotes and services.
“These fees can seem very overwhelming to many sellers and buyers alike,” says Sharon. “Thankfully, with the right team of professionals at your side, things are a lot better. They can help you get clarification on why things cost the way they do, find out which fees are negotiable, and help you determine whether the rates are reasonable. I cannot overstate the value an experienced loan officer can have to a seller; it’s really a night and day situation.”
Are There Any Truly Optional Fees for Sellers?
While it may feel like a lot of these fees are completely outside of your control, there is hope – with the right help. Like Sharon said: a professional loan officer can do a world of good for the entire process. For one thing, they may be able to point out aspects where you are putting yourself at a disadvantage.
For example, if you’re looking to get out of your old property quickly, you may want to incentivize buyers to take a look. Some sellers may decide to lower the overall cost of the home, while others may decide to offer closing credits instead.
“During the sale process, some sellers choose to negotiate closing costs with the buyer, to encourage them to close the deal,” explains Sharon. “While this can be helpful in certain situations – if you anticipate that you’ll also be overwhelmed by those costs yourself – you’ll really just be trading one issue for another.”
While making the sale seems like the best way to escape the fees, there are other ways that you can ease the tension before you even start to sell.
3 Ways To Reduce Seller Closing Costs
As you seek out services to help sell your home, you may find yourself overwhelmed with options. Never fear! Everest experts are going to help you target that finish line with 3 top tips:
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Shop Around for Services – Compare rates for title and escrow companies to find the best deal.
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Negotiate Agent Commission – Real estate commissions are flexible. You may be able to negotiate a lower rate, especially if you’re also buying a new home with the same agent.
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Request a Title Insurance Reissue Rate – If you’ve recently purchased your home, you may qualify for a reduced rate on title insurance.
Another option to consider is FSBO (For Sale By Owner). This means that you would be selling your property without the help of an agent. Since, agent commission typically ranges between 3% and 6% of the sale price, this can save you a significant amount on your final costs. However, our experts advise approaching this option with a healthy supply of caution:
“Yes, selling without an agent can save you on commission costs. However, it may involve more effort on your part,” says Sharon. “Professionals like real estate agents and loan officers have the experience and expertise to make the entire sale process go more quickly and smoothly. If you try to go it alone, your closing could take much longer and involve more roadblocks.”
Our final piece of advice? Don’t let the fear of closing costs keep you from closing right. The peace of mind you gain from selling faster, easier, and with more compliance, can have a positive effect on your financial and personal wellbeing for years to come.
“Really, it’s about knowing what you’re getting into,” Sharon says. “Take the time and opportunity to understand the closing process. No matter how you go about selling your home. That little bit of extra effort will be 100% worth it.”
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the terms of your sale from start to finish.
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