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How Much Are Closing Costs for the Seller and When They’re Due

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buyers and sellers settling closing costs for a home

recent study showed the average closing costs on real estate transactions in 2021 were $6,905 including taxes, that’s a 12% increase from the year before.

In most cases, sellers pay the bulk of these expenses from the proceeds they receive from the sale, but the buyer must pay out of their pocket. Costs vary depending on location, with D.C. leading the way, and Delaware and New York following close behind.

How much is the closing cost for the seller in your area? It depends on your circumstances.

Keep reading to find out what you need to know about closing costs for the seller.

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What are closing costs on a home?

Closing costs are fees that buyers or sellers must settle to transfer ownership of a property.

Local real estate laws and regulations have a major impact on which fees you’ll pay to sell your home and how much these amount to. Some states even have different terminology for closing costs.

In some cases, the seller may agree to pay some of the buyer’s closing costs to facilitate the sale. These are the fees associated with closing when you’re selling a home:

Deed transfer tax

Also known as real estate transfer tax, or simply transfer tax, your state or local government levies this tax. Estate tax and inheritance tax are a type of deed transfer tax, too. Estate tax and inheritance tax are a type of deed transfer tax, too.

This amount covers the cost of changing the deed information to that of the new owner. The amount you pay depends on the value of the property.

Recording fee

This is another fee that varies depending on the location of the property. It covers the cost of recording and filing the mortgage and deed information in the public record.

Some states combine the recording fee and transfer fee into a single payment, although the recording fee is usually a set amount per page rather than a percentage of the home’s value.

It’s in the buyer’s best interest to ensure this process takes place, as many lenders won’t finalize a mortgage without it, but buyers and sellers frequently split the costs. 

Title search fees

property title search will reveal if there are any liens or ownership claims on a property. Buyers and sellers typically split the costs of a title search.

If the title search reveals a lien on the property, the seller must pay it before the deed transfer proceeds. In some cases, the buyer might opt to pay this amount to secure the sale.

Real estate commissions

Real estate agents usually receive their cut of the sale once the deal closes. The seller pays both the real estate agents and brokerages involved in the sale.

In most cases, this amounts to about 5% or 6% of the sale value, split between the two agents. Real estate agents’ fees cover the costs of marketing the property and guiding both buyer and seller through the sale process.

Attorney’s fees

Although it’s not a legal requirement in some states, hiring an attorney can help streamline the home-buying process. They assist with most of the paperwork required for the sale, attend the closing process, and help resolve disputes.

In some cases, an escrow or a title insurance representative can oversee the closing procedure.

If you decide to hire any of these professionals, you pay for their services.

Mortgage payments

Sellers must pay the outstanding balance on their mortgage when they sell their home. Plus, you may need to pay penalties for settling this amount early.

According to the Consumer Financial Protection Bureau, your lender must include this information in your mortgage contract. So, check this document while calculating your closing costs.

If you pay off your mortgage before the end of your agreement, you may pay penalties based on how much you still owe according to this agreement. This may amount to a few months’ interest payments or around 3% of the outstanding amount.

When are closing costs due?

Buyers must settle their closing costs when the home changes hands, which is a date indicated on the sale agreement, called the ”closing date”.

Sellers usually pay these costs out of the proceeds from the sale of their home, unless their closing costs amount to more than the amount they’re selling their home for.

Buyers must arrive with a cashier’s check, a certified check, or cash to settle the closing costs.

This process is often called ‘settlement’ and the money paid in this process is ”cash to close”. Cash to close usually includes the sum of everything the buyer needs to pay, minus any credits provided by the seller

The buyer’s lender usually informs them about this amount in the closing disclosure

Who pays closing costs?

All closing costs are negotiable between the buyer and the seller, and both may agree to pay more than they should, depending on how much they want to conclude the sale.

In most cases, each party is responsible for certain costs. 

What are the closing costs for the buyer?

The buyer pays most of the costs associated with a home sale, and they usually need to pay these costs upfront. In some cases, they can include these costs in their mortgage, but this service usually comes with exorbitant interest rates.

If the buyer can’t afford to pay some of the closing costs, they can ask the seller to split the costs with them.

In most cases, the seller is responsible for the following closing costs:

  • Title Search
  • Title insurance
  • Loan application fees
  • Loan origination fee
  • Home inspection costs
  • Home appraisal fees
  • Property surveying fees if necessary
  • HOA fees if applicable

What are the closing costs for the seller?

Unless they agree to pay some of the buyer’s closing costs, the seller is responsible for the following:

  • Mortgage settlement
  • Mortgage penalties
  • Existing liens
  • Real estate agents commission
  • Prorated property taxes

Although the seller doesn’t pay as many closing costs as the buyer, their overall contribution is usually more and can amount to as much as 10% of the home’s sale price, excluding any outstanding mortgage payments. 

Should I pay the buyer’s closing costs?

While it might seem like a waste of money to pay the buyer’s closing costs, this practice has a few benefits for sellers. These are:

Increases the pool of buyers for your home

High closing costs can put buyers off, especially if they don’t have the money to pay these costs in cash along with their deposit.

In these cases, they’ll need to include the closing costs in their mortgage. If they don’t qualify for this extra finance, they might withdraw their offer.

Usually means a faster sale

It can take longer to sell your home if you refuse to pay the buyer’s closing costs.

Most interested buyers will request that the seller pays some of the closing costs. If the seller doesn’t agree, they’ll keep shopping around until they find a home they can afford. 

Insisting the seller pays closing costs means they’ll need to approach their lender for a larger mortgage, which delays the approval process.

Reducing closing costs for the seller

As a seller, the easiest way to reduce closing costs is to refuse to pay any of the buyer’s closing costs or increase your home sale price to include closing costs. You can also ask the buyer to pay some of your costs.

These tactics only succeed in a strong seller’s market. 

Another area where you can save money is on realtors’ commissions. Try negotiating with your real estate agent for a reduced fee, or sell your home yourself. 

While selling your home on your own isn’t a task for the faint-hearted, it’s a lot cheaper than working with a real estate agent. Finally, you could consider selling your home to a cash buyer. 

In most cases, cash investors don’t need to wait for mortgage approvals or a home inspection, so you’ll enjoy a much faster sale, too.

Selling your home for cash means you don’t have to pay the real estate agent’s commissions. Depending on your circumstances, a cash investor may offer to pay some of the closing costs to speed up the sale, too.

Selling without the hassle of closing costs

Selling to a cash buyer is an obvious way to save on closing costs for the seller. Plus, you’ll enjoy a faster sale.

There are risks associated with selling your home this way, though. Some of these companies offer rock-bottom prices and employ high-pressure tactics to the detriment of the seller.

With iBuyer.com, you don’t need to worry about these issues. We can provide you with a market-related valuation of your home in minutes and connect you with a reputable, qualified cash buyer if you’re interested.

Simply enter your address on our home page, and you’ll receive a fair offer for your consideration.

Interested in your home’s current market value? Receive a free online home value estimate!

Find out what your home is worth in minutes.
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