The Costs of Selling a Home
A Quick Guide for Estimating Net Proceeds and Closing Costs
As a seller, you'll be facing a pile of taxes, commissions, fees, and closing costs that could claim up to 4 to 7 percent of your home's sale price.
To figure out the net profit you'll take away from a sale, you’ll need to look at something called a Seller's Estimated Net Proceeds worksheet. This document lists which expenses will be deducted after you close.
The costs differ from state to state, but these are some of the most common closing fees you are likely to encounter:
- Mortgage payoff balance – The deductions from your sale price consist of your own home loan, second mortgages, and home-equity lines of credit.
- Loan payoff fee – There are lenders who might charge an administrative fee when you pay off your home loan.
- Lien releases – In the event you owe money for court judgments, property taxes, or a contractor who did work for you, you might have a lien placed on your property. When it’s time to sell a house, you are required to pay any liens before the sale is able to close.
- Prepayment penalty – Some lenders will hold you responsible for a penalty if you pay off your loan earlier than the full term.
- Recording fees – If you owe any money on the property, you’ll have to pay this fee to show that all of your debts have been fully paid.
- Commissions for real estate listing and selling agents – Commissions represent the price you pay to agents who you’ve charge to sell a house on your behalf. Typically, the fee is 6 percent, with half of the commission going to your agent's brokerage and the rest going to the buyer's agent's brokerage. Agents will get paid by their respective brokerages.
- Notary fees – These are fees charged by a notary in order to verify your identity and to ensure that the documents are executed properly.
- Escrow fees – You’ll usually use an escrow company as the intermediary between you and a buyer to make sure that the money is handled properly. Escrow agents take the money from the lender, pay off your home mortgage and any closing costs, collect deposits, and give the proceeds to the lender. These costs may be able to split with your buyer.
- Title search fees – Title insurance says you have the legal right to sell your home. The job of title companies is to search public records and come up with a title insurance commitment. This commitment declares that you own the home, and it also details anything else that could affect the title, such as mortgages, easements, restrictions, liens, and homeowner’s association declarations, among others.
- Seller concession – The seller concession assists buyers in paying their closing costs. For example, if you have a buyer who asks for a concession of 3 percent, then that amount is added to your mutually agreed-upon home price, and you will give that 3 percent back to your buyer to cover closing costs.
- Repairs – You may be required to pay for repairs on the home, either by negotiating with the buyer or as a condition of their lender.
- Home warranty – Sometimes, a seller will consent to pay for a buyer’s home warranty, which offers a protection plan for the buyer's first year in the home.
- Termite letter – This is a document that’s required in certain regions of the country.
These are just some of the most common costs associated with selling your home. To know which ones apply in your case, talk to a Realtor about them early on to keep from getting a surprise at closing.
