Real estate closing costs are not always limited exclusively to the buyer. As a seller there can be a handful of costs that have a direct impact on your bottom line. Knowing and understanding these costs should most definitely influence where you list your home and even the offer you are willing to accept. In some cases the costs are minimal and won’t move the needle too much in either direction. Other times, they will be thousands of dollars and completely change the way you look at the entire transaction. Either way, you need to know what you can expect at the closing so you have an idea of how much you plan on walking away from your sale with. Here are the four most common seller closing costs you need to factor into your bottom line.
Attorney/Commission. In most cases the largest closing cost comes in the form of attorney and real estate fees. There are a handful of selling commission plans catered to every type of seller, so these costs are rarely identical and usually vary on a transaction by transaction basis. The average seller commission is typically 2-3% of the purchase price. This is typically a good investment because getting a quality listing agent often generates a much larger return and a higher sales price. The same is the case with attorney fees. Your attorney is usually the last line of defense in the transaction. They make sure you are protected throughout the process and are available to negotiate any issues with the contract. Most attorneys will charge anywhere from $450-$750 depending on the specific transaction. There are also a handful of other filing fees and charges that can tack on a couple hundred dollars in costs. Not to sound cliché but you can’t put a price on a good attorney and real estate agent.
Loan Payoff. The amount you see owed on your mortgage statement may not be the same as the payoff you get for your closing. When you close, the mortgage needs to be paid up until the day your loan is paid off. This leads to a prorated mortgage payoff that is typically higher than your statement balance. You also need to look for prorated amounts of property taxes, homeowner’s insurance and association fees. The good news is that by law your lender must send whatever is in your escrow account within 30 days. You may pay a little more than you anticipate at closing, but you will get a check back from your lender before you know it.
Taxes. Another large chunk of closing costs comes in the form of transfer taxes. As is the case with your loan, property taxes need to be paid for at all times. In fact, taxes are usually paid an extra installment in advance. Every town, city and county can be a little different regarding how often they bill, but the taxes must be paid months in advance. There is also a small fee imposed by each state to transfer property taxes. This is usually less than 1% of the property value, but still impacts your bottom line.
Title Concerns. All real estate transfers must come with a clean title. That means any lien you have must be paid off prior to the sale. There are times when an old lien will pop up from years ago. You can try to track down the lienholder, but either way the title must be clean and free of any liens and encumbrances prior to transfer. This includes any second mortgages or home equity lines of credit you may have.
If you have any question what your costs may be reach out to your attorney and ask for an estimated breakdown. Do this prior to listing your home so you have some idea what the price needs to be for you to reach your desired walk away number.