Although buyers typically pay for homes in a real estate transaction, sellers also incur expenses. Be wary of getting too involved in the money you’ll receive from the sale, and be aware of closing costs for transferring ownership and selling property. Closing costs vary by state and each sale, but we’ll explore an average closing cost for sellers of homes.
How Much Are Closing Expenses?
“Closing costs” refer to all costs of closing an actual property transaction. This includes fees such as escrow and loan origination fees, title insurance premiums, specific fees that the seller must pay, and other fees, which could vary depending on who pays what during negotiation.
Selling fees can range from three to five percent of a loan’s purchase value. According to 2022 figures from CoreLogic’s ClosingCorp, average national closing costs amount to only 1.8 percent of property value in 2022 – making a single-family house within the U.S. cost-of-closing around $6,905, according to ClosingCorp estimates.
Sellers Pay Closing Costs
Closing costs and commissions for real estate sales are often lumped together under one category. Sellers typically cover these expenses, with commissions usually amounting to 6 percent of the sale price; however, recently, they have been decreasing and may now only cost five percent – meaning if your sale value is $400,000, then 5 percent would equate to $20,000. Agents acting on both sides usually split any commission down between themselves, meaning, as the seller, you would be responsible for paying both agents involved in this scenario.
Here is a breakdown of the most common closing costs for sellers:
- Closing costs vary by location
- Information sources include The Mortgage Reports and My Mortgage Insider
- Transfer tax amounts vary based on geography
- Title insurance costs $550
- Escrow costs range from $350 to $1,000
- Attorney fees vary significantly, typically around $1,000; the overdue amount due on the mortgage is unknown.
- Costs for closing are typically covered by buyers
While both buyers and sellers must pay their share of closing expenses, the buyer is typically ultimately responsible for most of these fees when selling a home. The exact amount paid depends on negotiation, but sellers often give credit towards part or all of these expenses as concessions to increase the value of a property for potential purchasers. This practice, known as concessions from the seller, helps boost value in the marketplace for potential purchasers.
Here is a breakdown of some typical closing costs that home buyers typically encounter:
- Closing costs per capita
- Sources: Mortgage Reports and My Mortgage Insider
- Legal fees Vary
- Fees for loan origination 1.1% of the loan amount
- Appraisal fees are $450
- Processing or underwriting fee of $400
- Credit reports $35
- Home inspection fees are $300-500
- Escrow and signature $450
- Recording costs $101
- Title searches and title insurance range in cost from $300 to $2,500.
What time is the due date for closing expenses?
Closing expenses are due after your home sale, the last stage before handing over keys to the purchaser. They must be paid after you, and the buyer visit an agent, title firm, or attorney to arrange funds distribution and sign paperwork associated with closing.
Be sure to take “due when you close” seriously: Have your money orders ready and bring them with you when closing – they will be returned at that time, not later.
Under the law, buyers and sellers must receive closing documents containing all pertinent details of their deal at least three business days before it closes. These documents also include any related closing charges.
How Can You Reduce Closing Costs
Selling your house often comes with the advantage of having closing costs paid for by the profits generated from the sale, so there’s no need for extra funds if you’re dealing with the listing end of things. There are several methods you may explore to reduce expenses:
- Determine if your estate agent would be willing to offer a lower commission or cooperate with an agent that discounts services. Doing so could make you receive less marketing than otherwise through agents that charge lower commissions.
Compare loan origination fees and other costs to find a lower-priced mortgage company. - Consider selling your house. Becoming a personal agent, also listed as a for-sale-by-owner (FSBO), can help you avoid commissions and keep more of the sale cost. Although this requires considerable work, the effort will be worth it.
- Verify if the buyer is willing to cover closing costs or increase the purchase price of your home and accept responsibility for paying them.
- Speak with your lawyer about obtaining better bargaining conditions for real estate matters or title firms.
Cash for Your Home When Selling Your House
Selling to an iBuyer or any business that does not require mortgage financing is one way to reduce closing costs. Since no lenders or banks are involved in these deals, there are no charges involved, and it eliminates the need for real estate agents. Be aware; though, these firms often give lower prices than what can be obtained with traditional sales methods.
Although buyers typically cover most of a home’s closing costs, sellers must also foot some bills. Keep in mind the closing expenses you incur as the seller and various charges associated with selling, such as home repair expenses, staging fees, and mortgage repayments in case another property is purchased before your current one sells. Furthermore, it may be possible that you owe capital gains tax upon the sale, which could reduce overall profit after tax deductions are deducted.
