Due to the seller’s market that is currently in place, high demand, and low inventory, many homeowners are contemplating listing their homes for sale. But beware – if you’re ready to hire an agent and put your house on the market, you should be aware of the numerous hidden costs of doing so.
You should know the ins and outs of closing costs for sellers, from what is included to how to negotiate a better deal to avoid unpleasant surprises during the home-selling process.
Closing expenses are a collection of fees that the buyer and others must pay by the seller to complete the sale of a home. Although many individuals know closing fees for purchasers, they might not be mindful of what sellers’ closing expenses entail.
Closing costs for home sellers
Here are some costs that homeowners should be aware of as they close a deal.
Broker commission
Agent commission costs are the most significant expense on home sellers’ shoulders. The buyer’s and seller’s agents’ commissions typically share 40-50% of the total sale price. Therefore, commission fees on a $400,000 house might come to $20,000.
Transfer tax
The state, county, and municipality where the property is located will levy taxes and fees once you officially transfer the title of a residence. Although these fees are occasionally shared, it’s typical for the seller to pay them. These taxes differ by state and locale and are typically expressed as a percentage of the total sale price.
Title protection
The owner of a title insurance coverage is shielded from disputes over ownership. The lender’s title insurance protects the lender, and the owner’s title insurance protects the owner.
The lender’s title policy, which is often necessary for anyone seeking a mortgage, must be paid for by the purchasers. Who pays for the owner’s title insurance, however, depends on the property’s state.
Escrow charges
When a customer presents an offer on a property, escrow officially opens. The good faith deposit or earnest money sum deposited into an escrow account run by a neutral third party demonstrates their commitment to buying the property.
The escrow company, a neutral third party, is compensated for its services in establishing escrow. Depending on the property’s location, these fees are often shared 50/50 between the buyer and seller.
Lawyer’s fees
A seller’s attorney will help them sort through the documentation and ensure they don’t fall prey to any loopholes because real estate transactions are intricate.
A lawyer should be retained to review the final contract, even though buyers and sellers aren’t required to do so in some states. But make sure you’re prepared to pay them for their time. A good lawyer’s rates range from $170 to $700 per hour.
Unpaid invoices and liens
The seller is responsible for prorated charges like property taxes and utilities. The seller typically pays these until the selling date, after which the buyer assumes responsibility. Before closing the purchase, sellers must pay off unpaid debts or remove liens from the property.
How to estimate closing expenses
Including this money in your overall moving budget is vital because closing expenses for sellers often account for 10% to 15% of the final sale price. Additionally, these prices vary according to the vendor’s state and are significantly impacted by regional rules and regulations.
For instance, it is typical in Florida for the seller to cover most of the closing fees to close the agreement and, in this way, shoulder most of the financial burden. However, due to higher property values in Florida, sellers typically get paid more. On the other hand, in Alabama, for instance, the buyer and seller usually divide closing fees more evenly.
How to reduce closing expenses
In a seller’s market, specifically, there are various ways for home sellers to reduce their closing expenses. Homeowners have more negotiating power and may even request the buyer to bear some costs when there is a high demand and low supply.
In reality, sellers have the right to decline to cover closing expenses if they believe another bidder would make a better offer.
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