The Closing Costs for a Seller and How to Save on Them
Closing costs for a seller are the taxes, fees, and other expenses which are paid by the seller while finalizing the sale of their house. And good news, a seller’s closing costs come from the money earned when the deal closes, so you don’t need to pay out of pocket.
Closing costs for sellers include:
- Real Estate Agent Commission
- Transfer Taxes
- Escrow fees
- Attorney fees
- HOA regulations
Below you’ll learn a little bit more about what the costs of selling a home entail, how much they might cost, and what you can do to reduce them.
Real Estate Agent Commissions
Real Estate Agent Commission is the money paid to Real Estate Agents for their work in selling the house. You’ll be paying both the listing agent, and the buyer’s agent.
Most of the money you pay at closing goes to Real Estate Agent Commission. Both agents will take a commission that’s around 2-3% of sales price. It is also possible to negotiate the percentage your agent will take, but you need to negotiate this during the initial talks with them.
If your agent won’t budge on prices, there are other ways to avoid paying a commission or to reduce your fees:
- Listing for sale by owner: For Sale By Owner is when you sell your home without the assistance of an agent. You’ll have to do more work yourself, with the tradeoff being that you get to keep more money.
- Employing a discount agent: Discount Agents are reputable agents who take smaller commissions than other agents. They also offer fewer services. To provide you cheaper service, they may not list your house on the MLS, do as many open houses or run as many ads on social media and in newspapers or magazines.
Transfer Tax is collected on the transfer of property. The state collects it, and exact costs can vary across the US. On average they’re between .5% and 1%, so they aren’t too bad.
Cities and counties may also charge Transfer Tax on top of what the state is taking. You’ll want to check your local tax regulations for more details and you may be pleasantly surprised to find your county requires taxes to be split 50/50 between sellers and buyers.
Short of selling your house for less money, you can’t reduce Transfer Tax. However, you can make it work in your favor. When calculating Capital Gains, you can add Transfer Taxes on to your cost basis and reduce your taxable gains.
Escrow is when a third party holds money until a contract is complete. As a seller you want Escrow because it provides some protection against a buyer walking away from the deal.
Escrow companies usually charge a flat fee, like $1,000, and an additional 1-2% of sales price. These are frequently split 50/50 between buyer and seller.
On your $300,000 dollar house you may be paying $2,000 dollars in Escrow fees.
There’s no magic solution to reducing Escrow fees, but you should shop around for a good Escrow company at a price you like. You can also negotiate with the buyer to have them cover more or even all of the Escrow fees.
Attorney fees are paid to attorneys who assist in the closing process. They will be paid at closing from the proceeds of the sale.
Some states require you to have an attorney at closing. These include Alabama, DC, Florida, Maryland, and Virginia. In these states they take the place of an Escrow company.
Attorney rates vary, some may charge you a flat fee of $1,500 or an hourly rate of $400 per hour. There are some ways you can reduce attorney fees.
- Don’t use an attorney: If your state does not require an attorney and you’re fine not having them present, you can completely avoid paying attorney fees.
- Shop around: Just like with Escrow companies, you can look for an attorney that’s a good match for you and charges a rate you like.
Prorated Property Tax
Prorated property tax is any property tax you owe up to the date of sale. Lots of places collect property tax in a lump sum each year, so if you sell in November you owe 11 months of property tax.
Homeowners Association fees are owed if your house is part of an HOA. Just like with property tax, you’ll have to prorate these fees up to the date of sale. Some HOAs also charge you fees to transfer property. Check your HOA agreement to see what the regulations are, and reach out to ask whether they can wave them.
Closing costs for sellers like you can quickly pile up. But now you know how much they may equal when you sell, and you’re ready with a few tips to reduce closing costs as a seller, or how avoid them altogether.
Here’s one last trick which’ll really reduce your closing costs: sell to Express Homebuyers. You’ll be charged no realtor fees or other closing costs when you choose to work with us and sell your house for cash. Call us at (877) 804-5252 for a free offer!
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