Understanding Closing Costs and Seller Responsibilities: What You Need to Know Before Selling Your Home
Selling a home is a big step, and while most of the focus tends to be on the listing price and finding a buyer, it’s important to understand what happens once you’ve accepted an offer. As a seller, there are costs and responsibilities that come into play during the closing process. Let’s break down what you need to know about closing costs and your key responsibilities so you can be fully prepared.
What Are Closing Costs?
Closing costs are the fees and expenses associated with transferring ownership of a home. Both buyers and sellers have closing costs, and they typically cover services like title insurance, escrow, legal fees, and any necessary inspections. For sellers, these costs are deducted from the sale proceeds, so while you may not be paying out of pocket, they can impact your bottom line.
The total amount of closing costs can vary based on factors such as your home’s price, the location, and the terms of the sale. Here’s a closer look at some of the most common closing costs for sellers.
Common Closing Costs for Sellers
Title Insurance (Owner’s Policy)
Title insurance protects the buyer from any disputes over ownership that could arise after the sale. As a seller, you’re usually required to pay for the owner’s title insurance policy, which ensures that the buyer receives a clean title. This cost typically ranges from $500 to $1,500, depending on the value of the home.
Escrow Fees
Escrow fees are paid to the escrow company or attorney handling the sale. These fees cover the management of the funds, documents, and transaction details between the buyer and seller. Both the buyer and seller usually split this fee, which can range from $1,000 to $2,000.
Transfer Taxes and Recording Fees
Transfer taxes are paid to the state, county, or local government for transferring the title of the home from the seller to the buyer. These taxes are often a percentage of the sale price, typically ranging from 0.1% to 2%. In California, for example, you may pay $1.10 per $1,000 of the sale price in transfer taxes.
Recording fees cover the cost of recording the new property deed with the county, ensuring that the buyer is officially listed as the new owner.
Outstanding Property Taxes and HOA Fees
You’ll need to pay any outstanding property taxes up until the day of closing. If you’re part of a homeowners association (HOA), you’ll also need to settle any unpaid dues and potentially pay HOA transfer fees to move the account to the new owner.
Home Warranty (Optional)
Some sellers offer a home warranty as part of the sale to provide peace of mind for the buyer. This covers repairs to major systems or appliances for a set period after closing. A typical home warranty costs between $300 and $600.
Repairs or Credits
If the home inspection uncovers any issues, you may need to either make repairs or offer a credit to the buyer to cover the cost of repairs. Negotiating repairs can help keep the sale on track, but it’s important to budget for potential expenses if significant problems arise.
Agent Commission Fees
Conversation about agent commission has changed dramatically with the new laws, but one thing remains the same: who you work with matters. Make sure you are getting the highest value from your listing agent: what do they include in marketing? How much time do they plan to commit? What services do they provide (i.e. staging, cleaning, consulting with contractors, etc.)?
While closing costs and seller responsibilities can feel overwhelming, understanding them ahead of time will help you navigate the process with confidence. By working with a trusted Realtor and being prepared for your obligations, you can ensure a successful and stress-free closing.
If you’re planning to sell your home and want expert guidance on handling closing costs and responsibilities, contact us today. We’re here to help you every step of the way, from pricing your home to handing over the keys on closing day.