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What are closing costs for home sellers?

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A “for sale” sign and a “for sale” sign are drawn in Salt Lake City on Monday, October 18, 2021. According to a recent RE /, Salt Lake City is second in the nation with the largest rise in home selling prices. MAX National Housing Report. (Christine Murphy, Dezalet News)

Estimated read time: 5-6 minutes

Washington — Due to the high demand and low inventory in the current seller’s market, many homeowners are embarking on the idea of ​​selling their homes.

However, be careful. If you’re ready to find an agent and list the homes for sale, there are many hidden charges associated with selling a home and you need to be prepared in advance.

You want to avoid surprises in the home selling process and understand the inside and outside of the seller’s closing costs-from what’s included to how to negotiate a better deal.

To get started, closing costs are the various fees paid to complete a home purchase transaction. Some are paid by the buyer and some by the seller. Many people know the closing cost of the buyer, but may not understand what the closing cost of the seller is.

There are some fees that homeowners should be aware of when preparing to close a deal.

Agent commission

The most important cost that a home seller bears is the agency fee. The commission rate is typically about 5-6% of the final selling price and is split between the buyer and the seller’s agent. So for a $ 300,000 home, the total fee can be $ 18,000.

Transfer tax

When you formally transfer ownership of a home, the state, county, or city in which the property is located will charge taxes and fees. These charges may be split, but it is fairly common for sellers to bear these costs. These taxes are usually expressed as a percentage of the final selling price and vary by state and location.

Title insurance

Title insurance policies protect owners from home ownership disputes.

There are two types of title insurance: lenders (protecting lenders) and owners (protecting owners). Buyers are usually expected to pay the lender’s ownership policy required by the person receiving the mortgage. However, who pays the owner’s ownership insurance depends on the state in which the property is located.

Escrow cost

The escrow process begins when the buyer makes an offer to the house. The amount of “Sincere Deposit” or “Serious Money” indicates that they are serious about buying real estate and are deposited in an escrow account managed by a fair third party.

This impartial third party (also known as an escrow company) charges for the services in setting up escrow. These rates are usually split between the buyer and the seller in 50-50 and depend on where the property is located.

attorney’s fee

Real estate transactions are complex and seller lawyers help them go through paperwork and not fall victim to loopholes.

In some states, buyers and sellers do not need to hire a lawyer, but it is advisable to hire a lawyer to confirm the final contract. However, make sure you are ready to pay for the time. For a good lawyer, attorney fees range from $ 150 to $ 500 per hour.

Unpaid invoices and lien

It is up to the seller to pay for prorated items such as property taxes and utilities. Usually, the seller has to pay these by the date of sale, at which point the buyer takes over the costs. The seller is also responsible for any unresolved decisions or lien regarding the property before proceeding with the transaction.

Calculation method of settlement cost

It is important to include these funds in your overall transfer budget, as the average closing cost of a seller will range from 8% to 10% of the final selling price once everything is said. In addition, these costs vary depending on which state the seller lives in and are strongly influenced by local regulations and laws.

In Florida, for example, it is customary for sellers to pay most of the closing costs to close a transaction, and in this sense bear most of the financial burden. However, due to the high real estate prices, sellers usually receive more payments in Florida. On the other hand, in Alabama, for example, closing costs are traditionally more evenly divided between buyers and sellers.

Sellers also need to take into account additional costs such as home repairs and mortgage payments when calculating the amount to pay to sell a home. Sellers often enhance their appearance and structure before putting their property up for sale in order to quickly attract buyers. You will also need to repay the rest of your mortgage and accrued interest to officially move out.

All of these costs can be added quickly, so it’s important to track your spending and keep your budget.

How to reduce closing costs

Home sellers can take several steps to save on closure costs, especially in the seller’s market. When inventories are low and demand is high, homeowners have more leverage in the negotiation process and may even ask buyers to bear certain costs. In fact, the seller can refuse to pay the closing cost if he thinks he can get a better offer from another buyer.

However, covering some of the buyer’s closing costs does not necessarily have to be bad. Under the right circumstances, if the buyer’s overall offer is strong enough, it can help the seller save money in the long run. Here are some things to consider when deciding whether to pay closing costs:

As the seller’s market continues to expand, some experts predict the collapse of the housing market. The reason for being on top of things and getting ready to sell your home as soon as you get the chance is even more so.

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