Closing Costs Associated with Selling Your Home
When you are selling your home, there are several standard closing costs associated with the sale that most sellers can expect to pay. It is important to know about these costs up front, so that you can factor them into the purchase price in order to know what your net proceeds will be. Knowing this information can help a seller in pricing their home, as well as negotiate offers. If you are working with a Realtor, he or she should have tools available to give you a very good estimate of what your closing costs will be.
If you have listed your home with a Realtor, one of the larger closing costs you will have is commission. This is typically seen as a percentage of the final sales price, but can also be a flat fee. Although this commission can seem like a large chuck of change, working with a Realtor who is an expert in the real estate field has countless benefits and can help you navigate the sale from listing to settlement.
Another closing cost that most sellers pay are transfer and recordation taxes. These are taxes paid to the state, county, and/or local government in conjunction with transferring the property from one person to another. These are also paid as a percentage of the purchase price. In Maryland, it is very typical for a buyer and seller to split these transfer and recordation taxes equally. However, they do not have to be split, and this is something that can be negotiated between buyer and seller before a final purchase price is agreed upon.
Depending on the time of year the settlement takes place, a seller may also be expected to pay real estate property taxes at closing. Or, the seller may be reimbursed for taxes already paid. These taxes will be prorated up to the date of settlement. Similarly, HOA, or Homeowners Association, dues are also often handled in this way at closing.
Another common cost a seller may encounter at closing is a Seller Contribution, or Seller Credit, to the buyer. This Seller Credit is negotiated between the buyer and seller long before closing, and is usually requested by the buyer to offset their closing costs or increase their down payment. Although this credit is really just a decrease on the purchase price, it is considered to be a seller closing cost, and it will appear as a separate item on the settlement sheet.
Some sellers can also expect to pay a mortgage or deed release fee at closing. This is seen when the property is secured by a mortgage that must be released before the buyer can take ownership. The seller may also have a closing fee from the title company or attorney that is conducting the settlement. In Maryland, the buyer has the right to select the location of settlement, so this is often out of the seller’s control. Occasionally a seller will also pay for a repair to the property at closing as well. If the buyer has asked for repairs, or perhaps their lender is requiring the repair be done, the seller may ask for the repairs to be paid out of the proceeds of the sale, rather than paying the contractor directly. Sellers may see a variety of other costs that need to be paid at closing, but these charges are often agreed upon long before settlement, and should not come as a surprise.
When you are selling your home, you’ll want to have a good idea of what your closing costs will be from the beginning. Again, your Realtor will be a great resource for this information. By knowing what you can expect to pay at closing, you’ll better be able to price your home and negotiate the offers you receive, and won’t have any unpleasant surprises at the settlement table.