A Seller’s Guide to Closing Costs

When you’re selling your home, you probably have your heart set on making as much profit as possible while still selling within a reasonable time frame. However, you might not be thinking of another very important financial factor— the closing costs.

Buyers also have to pay certain closing costs, so you’re probably somewhat familiar with the concept; but if you have never sold a home before, you may be surprised that you, as the seller, are also responsible for a long list of sellers’ closing costs. In fact, in many states, the seller pays all of the closing costs.

How Much Should I Expect to Pay?

What’s the list price of your home? Take 5-10 percent of that, and that’s the amount that you should plan to pay in closing costs. Of course, if you sell for a bit lower or higher, the closing costs estimate will change as well. Let’s say that you sell your home for $250,000. That means you can expect to pay between $12,500 and $25,000 in total for closing costs.

Where Does the Money Come From?

Before you have a heart attack from that dollar amount, take a deep breath. It’s probably not coming out of your own pocket. In all likelihood, the closing costs will be skimmed off your profits, the amount that you’re making from the sale of your home. Of course, if you’re selling with really low equity or barely scraping by with a profit, you may have to put up some of that cash and take the loss.

Where is the Money Going?

Where does all this money go, and who receives it? Here’s a breakdown of typical closing costs, although this list may vary depending on the location of your South Florida home and other factors related to the sale of your property.

• Commission for the Realtors: Your realtor has been involved in every step of the process, guiding you as you help your home appear to its best advantage, setting up the open house, advertising the property, showing the house to potential buyers, and working through the negotiation process with your final buyer. Your realtor has done a lot of work, and he or she deserves the promised fee. Usually, that fee consists of 4-6 percent of the sales price. The listing agent and the buyer’s agent typically split that amount, so they each get 2-3 percent of the home’s selling price. While you may balk at shelling out that cash, keep in mind that this system actually works to your benefit. It ensures that your realtor will strive to get you the best selling price that’s possible in the current market. Achieving that top price is in both of your best interests. Without a realtor, you could be stuck without a home or paying on two mortgages for much longer than you want to be.

• Recording Fees and Transfer Taxes: The state government or your local government in your area of South Florida takes its cut as well. There are minimal fees involved with the transfer of the property’s title from you to the new owner.
• Attorney Fees: If you use your own lawyer at the settlement, you’ll need to pay the lawyer. However, you can cut down on costs by using just one attorney for both the buyer and the seller when you meet for settlement. Depending on the common practices in your area, the buyer may actually pay the lawyer, saving you a little money.
• Loan Payoff: Because of the interest accumulated on your home loan, you’ll need to come with some extra cash to complete the loan payoff. Find out if your mortgage includes a prepayment penalty for paying it off before the full term. If so, you’ll need to take care of that, too.
• Title Insurance: It is customary for the seller to pay the title insurance premium at settlement.
• Unresolved Issues: You’ll need to pay up for any liens or judgments against your property. You must also pay any homeowner’s association dues that are still outstanding. In some cases, you also need to pay prorated HOA dues up until the date of the settlement.
• Inspection Costs: If your contract stipulates that you must remedy issues discovered during the home inspection, you’ll need to cover the costs for any repairs, pest eradication, and other problems.
• Preparation Costs: You may have repainted your main living areas, swapped carpet for hardwood floors, replaced the kitchen counter-tops, or conducted some repairs and maintenance on your home to get it ready for sale. While these are not technically closing costs, they are costs directly associated with the sale of your home. Before you even list the property, figure out how much the closing costs are likely to be and add in the amount that you plan to spend prepping your home to sell. Estimate generously so that you are fully prepared for the financial cost of selling your property.

What Part of the Closing Costs Does the Buyer Pay?

Typically, the buyer of your home will pay for a survey if one is necessary, as well as for any inspections and appraisals that are stipulated in the initial contract. The buyer also pre-pays the next year’s taxes for the property and obtains insurance for the home. Lender fees and similar costs are also the buyer’s responsibility. If you feel that the buyer is trying to get you to pay for something that isn’t your responsibility, talk to your realtor or do some research into the regulations and rules for your part of South Florida. Once you have hard facts to back up your position, present that information to the buyer and see if you can work out a compromise that is pleasing to both parties.

Keep in mind that your ultimate goal is to sell the property. You don’t want to scare off buyers by trying to push the closing costs onto their plate. Your South Florida realtor can give you valuable advice about how to handle the closing costs and related arrangements. If you need additional perspective and assistance with closing costs, find a South Florida lawyer with expertise in the area of real estate. With some professional help, you can sort out any issues and move forward with the sale and settlement.