Understanding Closing Costs for the Seller
Sellers typically carry the majority of the closing costs in a real estate transaction. A seller should expect to pay between 6% to 10% of the sales price in closing costs, deducted from the profits of the home sale. What exactly are these costs and what are they for?
1. Real Estate Agent Commissions – The seller typically covers the commissions cost for both the listing agent and the buyer’s agent. This is usually around 5-6% of the home’s sale price split between the two real estate agents.
2. Transfer Taxes/Recording Fees – Transfer taxes (or recording fees) are charged either by your state or your county to transfer the title or deed from the seller to the buyer. Note: If there are any property taxes due or any liens on the property, those must be paid before this transfer can take place.
3. Title Insurance Fees – Sellers often cover the buyer’s title insurance premium. This protects the buyer and their lender in the case of a problem arising regarding the title or deed of the home.
4. Attorney Fees – The seller generally covers the cost of the attorney who handles the settlement of the real estate transaction. While some states do not require an attorney for a real estate transaction, South Carolina is one that does.
5. Loan Payoff Costs – While not technically a closing cost, the seller will want to plan for the loan payoff cost. This is the amount required by the seller’s mortgage company to consider the loan paid in full, including any early pay-off fees. The seller should also account for any home equity loans as part of their costs as these will be paid from any profits on the sale before a check is cut for the seller.
6. Misc Fees – There are a number of situations were extra costs could come in for the seller in order to complete the real estate sale. The seller will have to settle up any unpaid HOA dues, pay off any liens against the property, escrow fees, unpaid property taxes (pro-rated or not) and any concessions for issues discovered during the home inspection. For example, if termites are suspected, the seller could be held liable to pay for a termite inspection and remediation. The seller can offer a concession or reduction in sales price for any major issues found during the inspection or might be required to fix the issues before the sale can proceed, depending on the requirements of the buyer’s mortgage lender.
In most real estate transactions, the seller holds tremendous responsibility for the sale to go through and can be required to cover a significant portion of the closing costs. While some costs are covered by the buyer, such as the home inspection fee, the bulk of the costs rest with the seller.