What are the final costs for home sellers?
A “for sale” sign and a “sale waiting” sign are pictured in Salt Lake City on Monday, October 18, 2021. Salt Lake City ranks second in the country for the largest increase in home sales prices, according to a recent RE / MAX National Housing Report. (Kristin Murphy, Deseret News)
Estimated reading time: 5-6 minutes
WASHINGTON – With today’s seller’s market, coupled with high demand and low inventory, many homeowners are embarking on the idea of putting their home up for sale.
But beware ̵[ads1]1; if you are ready to find an agent and list your home for sale, there are many hidden fees associated with selling a home that you will be prepared for in advance.
You want to avoid surprises in the home sales process and understand the inside and outside of final costs for sellers – from what is included to how to negotiate a better deal.
First, the final costs are the various fees paid – some by the buyer, some by the seller, to complete the home purchase transaction. Many people are aware of closing costs for buyers, but may not be aware of what lies in the seller’s closing costs.
Here are some tips for homeowners to look out for when preparing to end a deal.
Agent commission
The most important cost for which home sellers are responsible is agent commission fees. Commission rates are usually around 5-6% of the final sales price, divided between the buyer’s and seller’s agents. Therefore, on a $ 300,000 house, commission fees can amount to $ 18,000.
Transfer tax
When you officially transfer ownership of a home, the state, county, and / or city where the property is located will charge taxes and fees. Although sometimes these fees are shared, it is quite common for the seller to cover these costs. These fees are usually represented as a percentage of the final sales price and vary by state and location.
Title insurance
A property insurance policy protects the owner against disputes over home ownership.
There are two types of title insurance – the lender’s (which protects the lender) and the owner’s (which protects the owner). Buyers are expected to pay the lender’s title policy, which is normally required for anyone receiving a mortgage. However, the question of who pays the owner’s property insurance depends on the state where the property is located.
Voltage costs
The deposit process begins when a buyer makes an offer for a home. The amount of “good faith deposit” or “serious money” shows that they are serious about buying the property and deposited in a deposit account controlled by an impartial third party.
This impartial third party (also called the escrow company) charges a fee for its services by setting up escrow. Typically, these fees are split 50-50 between buyer and seller and vary depending on where the property is located.
Lawyer fees
Real estate transactions are complicated, and a seller’s attorney will help them wade through the paperwork and ensure that they do not fall victim to loopholes.
Although buyers and sellers are not required to hire a lawyer in some states, it is still a good idea to hire one to review the final contract. However, make sure you are ready to pay for their time. Lawyer fees can range from $ 150 to $ 500 per hour for a good lawyer.
Outstanding bills and liabilities
It is up to the seller to pay for proportionate items such as property taxes and utilities. The seller must usually pay these until the date of sale, where the buyer takes over the costs. Sellers will also be responsible for outstanding judgments or encumbrances on the property before proceeding with the agreement.
How to calculate closing costs
The average closing costs for salespeople vary between 8% and 10% of the final selling price when all is said and done, so it is important to include these funds in the total moving budget. In addition, these costs vary depending on the state in which the seller lives and are strongly influenced by local regulations and laws.
For example, in Florida, it is common for the seller to pay for the bulk of the final cost to complete the deal and bear most of the financial burden in this sense. Sellers usually receive a larger payout in Florida, however, because real estate prices are higher. On the other hand, in Alabama, for example, final costs are traditionally shared more evenly between buyer and seller.
Sellers should also take additional costs, such as home repairs and mortgages, into account when calculating how much they will pay to sell their home. Sellers will often make cosmetic or even structural improvements to a property before putting it up for sale to attract buyers quickly. And they also have to pay down the rest of the mortgage and accrued interest to move out officially.
All of these costs can increase quickly, so it’s important to track your spending and try to stick to a budget.
How to reduce your final costs
Home sellers can take several avenues to save money on end costs, especially in a seller’s market. When there is low inventory and high demand, homeowners have more influence in the negotiation process and may even ask the buyer to cover certain costs. In fact, sellers may refuse to pay final costs if they think they can get a better deal from another buyer.
But covering part of the buyer’s final costs does not necessarily have to be a bad thing. Under the right circumstances, it can help save a seller money in the long run if the buyer’s overall offer is strong enough. Some things to consider when deciding to pay final costs include:
As this seller’s market continues to build, some experts predict a housing market crash. All the more reason to be on top, and prepared to sell your home quickly if the opportunity arises.
