Friday, November 24, 2017

Seller Closing Costs

Seller Closing Costs

Closing costs  for the seller are seemingly endless and can add up to a whole lot of cash.

And that cash can really cut into the profit a seller is expecting to pocket from the sale of his or her home.

A buyer's closing costs might typically range from 2 to 5 percent of the sales price, or $2,000 to $7,000  depending on the purchase price of the home.

But a seller's closing costs often go way beyond that, simply because most sellers use a full-service agent to sell their home, which can add an additional 4 to 7 percent to the closing costs.

Whether you're a buyer or a seller, your list of closing costs can add up to 20 items, or more.

In some cases, some companies will reduce their costs if you ask them.

Here's what you can expect to pay as a home seller:

Broker's commission. If you're using a full-service brokerage firm, expect to pay anywhere from  5 to 7 percent of the sales price. If you're using a discount broker, or if you've sold by-owner, your cost may range from a few hundred dollars to 5 percent of the sales price. 

  1. Cost of the survey. Sellers in some states are responsible for giving the prospective buyer a plat of survey of the property. The price for a plat of survey can range from $150 to $600. 
  2. Recorded release of mortgage. Verifies that your mortgage has been completely paid off by the sale proceeds, usually $20 to $150. 
  3. Courier fee to pay off loan. Typically runs $25.00 to $75.00  or more. 
  4. Title insurance. In some states the seller must provide a policy of title insurance for the buyer. The cost of the policy depends on the sales price of the home and its cost can vary from a couple hundred dollars to several thousand dollars. Some title companies have added additional charges to the basic title charge. These fees go by the name of "update fees," "policy issuance fee" and the like. Some fees are as low as a couple of dollars and others up to $100. 
  5. Local city, town or village property transfer tax; county transfer tax, state transfer tax, state capital gains tax. Although the charges vary from municipality to municipality. In general, property transfer taxes can range from nothing to $10 per $1,000 of the sales price or more, or you may be assessed a flat fee. In some places, you have to pay a tax on the capital gains generated by the sale of your home. 
  6. Credit to the buyer of unpaid real estate taxes. Depending on how and when property taxes are billed in your state, it's possible that you will have to credit the buyer for real estate taxes that were for the time period you owned the home but will be billed after the closing date of the sale of your home. 
  7. Attorney's fees. If you choose to use an attorney, you'll either pay a flat fee starting around $350 or by the hour.
  8. FHA fees and costs. All FHA fees used to be the responsibility of the seller, but they are now negotiable. But if the buyer can't pay the fees, and the seller refuses to kick in a few bucks, the lender may not fund the loan.
  9. Condo/co-op move-out fee. A building charge that can range from nothing to more than $400. Some cooperative buildings can charge a percentage of the sales price to permit the sale of the coop. In some instances these fees can be as much as three percent of the sales price.
  10. Association transfer fees. Often required for condominium and townhouse buyers.   Sellers usually are stuck with some of these fees as well. Some of the fees are for processing the sales papers, move-out deposits, preparation of closing documents and even inspection fees. (These fees can range from a low of $25 to as high as $500 or more.)
  11. Paid utility bills. In many areas, local municipal officials will not let you close until you have proven that you are current on your utility bills. The charge for each copy of a paid utility bill, including water, sewer, garbage or electricity is $10 to $25.  Typically a seller can obtain these documents simply by calling  the utility company.
  12. Certificate of compliance with building and zoning codes. Your local municipality may charge for inspecting your home prior to the sale to insure that it meets up to date requirements. Such inspections can cost a nominal amount or run more than several hundred dollars plus the cost of fixing any items that are non-compliant. In addition, some municipalities charge a fee to verify the number of dwelling units permitted at a home being sold. The cost of such certificate can be nominal, but it may be a hassle to obtain the certificate. (Some municipalities won't charge for a certificate of compliance while others charge from $25 to $200 or more. But the bigger issue is when they find something wrong and then require you to fix it before they will allow you to sell the home.)
  13.   Home inspection fees. In some areas, local custom dictates that the seller pay for pest, radon and other inspections, which can range from $25 to $500 each. If there are problems with the home, you may have to fix the problems at a substantial cost. (While some home inspectors will bundle all of the services together and the buyer usually has to pay for the home inspection, other home inspectors will charge a basic fee of a couple of hundred dollars and then you can add on the cost of a pest, radon and other inspections.) Many home inspectors will charge based on the sales price for the home, while other home inspectors charge depending on the size and type of home. If you are a seller, you may find that using the services of one company to perform any home inspection needs you have to sell the home may be cheaper than hiring various companies to perform the various inspections required by your sales contract.
  14.  Home warranty. In California, most existing homes are sold with a home warranty, which guarantees to the buyer that all of the mechanical and electrical appliances are working on the day of closing and are guaranteed to work for the first year of ownership. The cost for a home warranty starts around $350-$500 and can increase as additional option items are added and the size and type of the home. Home warranties are becoming more popular in lots of states,  so don't be surprised if your buyer requests that you pay for one.
  15.  Association reserves. In some areas, the reserves held by condominium or homeowner. association are credited to the seller on the basis of the seller's percentage of ownership in the association. Fortunately, for the seller, this is one of the few instances of money coming back to the seller rather than a payment by the seller.
  16. Special assessments to associations. In many associations, if a special assessment has been levied, even if it can be paid over many years, the association will require that the assessment be paid in full at the closing.
  17. Other credits to the buyer. In some cases, sellers give credits to the buyer for things that don't work, or don't look nice, in their home. For example, if the buyer's inspector finds something wrong in the house, you may negotiate a credit to the buyer that will be paid at the closing. The cost of this will vary.
  18. Unpaid mortgage or home equity loan or line of credit. At closing, the seller must pay off any mortgage and home equity line of credits (HELOC) that are relating to the home being sold. The seller must remember that the prior months' statement for the mortgage or HELOC will not include the interest that is owed on the loan from the last payment date. Almost all mortgages are paid in arrears: you pay last month's interest in the current month. Therefore, if you made your most recent mortgage payments, you will still owe interest for the current month until the loan is paid off. 
Upside down loans. Although it seems unbelievable that anyone could be upside down on his or her mortgage (that is, owe more on the mortgage than the house is worth), many sellers each year will find themselves in this position. If you do manage to find a buyer, and the amount being paid for the home will not entirely pay off your mortgage, home equity loan or line of credit, you'll have to come to the table with cash in hand. If the lender "forgives" your loan, the IRS may see that as income to you, and you'll be taxed on the phantom income as if you actually earned it, at your marginal tax rate. Talk to your tax preparer for more details.