Closing day is right around the corner. After much time and effort, you found a buyer for your house and all of your hard work is about to payoff. The title company sends you your closing disclosure, and you suddenly realize that the amount you will be receiving at closing is nowhere close to the sale price of the home. You begin reviewing the disclosure line by line and start to notice all of these fees being charged to you as the seller. What are these fees? This article will dive into the common closings costs associated with being a home seller.
Common Closing Costs For Knoxville Home Sellers
Real Estate Commissions
If you are using a real estate agent to sell your house in Knoxville, you can expect to pay up to 6% of the home price in commissions to your agent. This agent splits this commission with the buyer’s agent if they are represented. Unfortunately as the home seller, you are expected to pay both sides of this commission. Commissions can be negotiated, or you can elect to sell your house yourself by electing to do “for sale by owner.” Even when you do for sale by owner, you can expect to pay a buyer’s agent if the buyer is represented.
Owner’s Title Insurance and Transfer Tax
When you sell your house, the title company researches the property to see who has an ownership claim or a lien. Most of the time this is just a mortgage company if you have a mortgage. Other common claims could be IRS, state, and contractors. An owner’s title insurance policy will protect the new owners from any claims against the property that may have been missed. The price of the insurance varies, but can usually ranges from $300 up to $3,000.
Transfer tax is what the title company will charge you to transfer the title of the home over to the new buyer. You will also hear this be called a government transfer tax or a title fee. This fee is largely determined by the state you live in.
Property Taxes and HOA Fees
When you sell your house, you will pay for a prorated portion of that year’s property taxes. This amount will vary due to the timing of the sale, or how much your property taxes are. If you live in a community that has an HOA, you can expect to pay for a portion of the HOA fees when you sell your house. It’s also common for the HOA to charge a transfer fee as well.
Title Fees and Attorney Fees
Title companies need to make money in order to stay in business. As the seller, you will pay a portion of the title fees that cover all of the work that lead up to closing. This is another line item that varies between title companies, but a good rule of thumb is 1% or the sale price of the home.
Some states also require an attorney be present at the time of the sale. This fee can vary widely, but expect to pay an average of $200 per hour for an attorney in Knoxville, TN.
During a buyer’s market, it’s common to offer buyers a credit toward their closing costs. Many buyers will make an offer with the contract stating up to a certain percent of the sales price to be included in the deal. For example, the contract could state: “Seller to pay up to 3% of the buyer’s closing costs.” This doesn’t sound like much, but on a $200,000 home sale, that is $6,000!
Closing Fees For A Seller – A $250,000 Sale
Real Estate Commission – $15,000
Title Fees – $2,500
Owner’s Title And Transfer Tax – $1,000
Property Taxes – $1,200
Seller Concessions – $7,500
TOTAL CLOSING FEES = $27,200
Final Thoughts On Closing Costs
Closing costs can add up quickly and cut into your profit as a home seller, especially during a buyer’s market. Many fees such as real estate commissions and seller concessions can be negotiated, but still have a substantial impact on what you walk away with at the closing table. One way to save money on closing fees is to offer your home for sale by owner. Although this can save you money from the selling side, any buyer represented will still want a commission. Your other option is to sell your home to a direct buyer. A direct buyer could be someone who has already approached you about selling your house (such as a friend or neighbor), or a company that specializes in buying homes.
*These articles are not a substitute for legal advice. All real estate transactions should be reviewed by an attorney that in knowledgeable about the laws and rules of your state.