A "sold" sign signals a closed deal on a house sale.
You would think that selling your home means money coming into your bank account, not going out. However, the old saying, "you have to spend money to make money" aptly applies to home selling. There are several costs involved that frequently land in the seller’s lap, although anything is technically negotiable in real estate sales. Some of these costs can be surprising if a seller is not forewarned.
Agent Costs
The largest and one of the most critical of closing expenses is the retention of a selling real estate agent. This is the person who essentially acts as a proxy for the seller, guiding him to a buyer and then closing the deal. Generally, the average suggested for an agent commission equals six percent of the final home sale value. However, the amount in practice varies from a low of four percent to as much as eight percent. This can be quite a bite from the gross sale amount; for example, a $300,000 home means an agent fee of anywhere between $12,000 to $24,000 based on the range. Much depends on the agents’ success and the details of the purchase. As a result, agents like to lock in their fee amount percentage by agreement before starting any selling work. The agent payment happens when the house sale is paid for.
Transfer Taxes
Like anything involving the exchange of large sums of value, the government and financial services develop ways to attach costs. Some jurisdictions attach taxes on sales in the form of transfer taxes or sales taxes. If a transfer tax applies, the recipient of the funds, the seller, frequently ends up paying the cost. Collection can happen at the time of the sale when title documents are transferred or it could happen after the fact with a tax bill sent to the seller. The amount due will be a percentage that is based on the total sale cost of the house.
Property Taxes
Property taxes themselves are frequently left for the new buyer, but sometimes sellers will assume this cost still to sweeten the purchase deal for a buyer. If the sale happens in the middle of a property tax cycle, both seller and buyer can find themselves being charged. Jurisdictions frequently collect property taxes in two payments. The first payment may happen while the seller owns the house and the second may occur right after the buyer takes over. The confirm taxes are paid, sellers or a financing bank can require the buyer puts these funds forward to ensure taxes are paid in the first year of ownership.
Transfer Costs
The home sale transaction itself will require the services of a number of licensed parties. Escrow services, title insurance, appraisal certifications and legal review, if needed, all generate fees and costs. Added together, these technical expenses can run between $5,000 to $10,000 a sale. Almost all of them are required to close a sale under many states' real estate law.
Normally, in a seller's market, these costs are frequently attributed to the buyer. However, when economic times are tight, sellers can find themselves taking on such costs to convince a buyer to commit and get the deal done.
Conclusion
House selling closing costs are not set in stone. Many of the expenses can be negotiated and can either be the responsibility of the buyer or seller. Much depends on how much both parties want the deal to close and the sale to happen. New sellers should not be fooled in just taking an agent's word for it. Remember agents are interested in closing since that's the only way they get paid. Sellers should educate themselves independently on the process so they know objectively what is a definite seller's cost and what is negotiable.
Tags: real estate, close sale, find themselves, home means, home sale
