Buyers and sellers have closing costs associated with the transaction. Therefore, it is important, before listing the property for sale, to have an estimate of the expenses you will have to pay in order to finally determine the amount you can count on once the transaction is finalized.
Most common closing costs for the seller
- Mortgage Balance – The balance of the existing loan, balance of the second mortgage and lines of credit on the home.
- Loan Fee Payable – Administrative fee charged by the lender to repay the loan.
- Debt Release – Money owed to contractors and/or for court judgments or property taxes. These amounts must be paid before closing.
- Early Payment Penalty – Some loans have a penalty for early payment of the debt.
- Recording Fees – Fees payable to document that debts have been paid in full.
- Commissions – The fees paid to the real estate brokers involved in the transaction. Generally 6% of the sales price and paid in full by the seller.
- Notary Fees – The fees charged by the notary to verify the identity of the signers of the document.
- Escrow Fees – Escrow agents receive money from the lender, pay all fees, collect deposits, and distribute the proceeds to the lender/seller.
- Title Search Fees – Proof that the seller has the legal right to sell the home. Title companies search public records and produce a commitment of insurance that certifies that the seller owns the home and lists the details of any liens or other claims affecting the title to the home.
- Seller Concessions – Amount the seller agrees to give in order to help the buyer pay his or her closing costs.
- Repairs – Work that the seller must complete (if applicable) before the sale, either as a result of the buyer’s negotiation or as a condition of the lender.
- Home Warranty – Protection plan for the buyer’s first year in the home.
- Termite Guarantee – Documentation used in some parts of the country that indicates the home is termite-free.
How to estimate closing costs?
For practical purposes, the closing costs for the seller can be estimated as follows:
- 5% on the sale price, MORE.
- Property taxes accumulated to date, MORE
- Mortgages and/or lines of credit that exist on the property, PLUS.
- Commissions (generally 6% of the sale price).
