When selling a home, one of the first costs that a seller must pay is for a buyer's agent. A buyer's agent will charge a commission when the buyer buys your home, but the commission can be reduced if you are selling a high-value home or in a hot market. Another closing expense is a lender's title insurance policy.
Escrow
There are several common closing expenses for home sellers, some of which the seller pays for. These fees are paid to an escrow company, who sets up escrow on behalf of the buyer and seller. In most cases, the fees are split 50/50 between the buyer and seller. Sellers may also hire an attorney to help them navigate the paperwork and avoid any loopholes. While not mandatory, this service can cost anywhere from $150 to $500 an hour, depending on the type of service provided.
Closing costs are a major part of the costs involved in buying or selling a home. Most buyers should budget three to seven percent of the total cost of the home to cover these costs. Here are some of the most common closing costs for home sellers in the East Bay Area:
Transfer tax
Transfer tax is an important fee for transferring real estate from one owner to another. While transfer taxes can vary from state to state, they are typically included in the closing costs of a sale. In some areas, the buyer must pay the tax while others require the seller to pay it. In this situation, negotiating the transfer tax can be an important part of the transaction.
Generally, a transfer tax is a percentage of the sale price or appraised value. Rates may vary by state, county and city. The amount charged is usually calculated per $100, $500 or $1,000. Depending on your state, the transfer tax can be as little as $2 in Arizona or as much as 2% of the total sale price.
Title insurance
When selling your home, you'll likely have to pay for title insurance. This insurance covers the property's title to a third party, such as a lender. It is important that you understand your responsibility under the policy, and the different types of title insurance you can buy.
Title insurance protects you against the risk of liens on your property, which can prevent you from selling or refinancing the property. It can also protect you from unknown issues with the home itself.
Taxes
If you are selling a home, you should plan for taxes. While taxes are typically non-negotiable, you may have the option of reducing them by making some repairs or improvements. You should also consider the cost of home inspections. These can be costly but help prevent buyers from rejecting your home. Home inspections can cost anywhere from $400 to a thousand dollars depending on the location and size of your home.
In addition to taxes, other closing expenses you should prepare for include a title insurance premium and transfer taxes. These taxes will be assessed by the government when you transfer the title from your old to your new property. You should also have title insurance, which protects the new owner in case there are title problems. These can arise due to outstanding liens and disputes.
Home inspections
When it comes to selling a home, one of the most common closing expenses is a home inspection. While some home buyers would like to skip this process altogether, a home inspection is a necessary part of the process. Almost every house inspection will reveal a problem or two, and while some minor problems might not be worth fixing, others could result in tens of thousands of dollars in repairs.
Getting a home inspection can help you avoid making a costly mistake at closing. A professional will poke around in the darkest corners of a house to detect any problems. Home inspections can range in price from $100 to $500. While they may not be included in your closing costs, they are an important part of the selling process and will protect both you and the buyer.
Repairs
The seller may be responsible for paying some of the costs associated with repairs before closing. This may be in the form of seller credit or a pre-paid repair amount. If the seller agrees to pay for the repairs before closing, they can deduct those costs from the final selling price. Other types of credits include seller points, which are percentage points the seller pays on the mortgage amount. The more points the seller pays, the lower the mortgage rate. However, the buyer may still deduct the points as mortgage interest.
A home inspection report identifies any deficiencies that may require repair before closing. Depending on the condition of the home, a seller may agree to accept a lower price if the buyer agrees to cover the costs of repairs. If the home is in demand, it may be possible to sell it as-is. A seller who is experiencing a seller's market may offer to pay for closing costs in exchange for a financial incentive.
