It is not always easy to figure out exactly how much cash you will have on hand after selling your home. It is recommended to use a seller closing cost calculator to estimate the closing costs associated with selling a home and calculate the net proceeds or the total gain. All you need to do is enter the details regarding the closing costs you need to pay, and it will automatically calculate the net proceeds of the sale when you enter the sale price.
Understanding closing costs
Both buyers and sellers are generally required to pay multiple closing costs before the papers are signed and the keys switch hands. Closing costs comprise all fees over and above the price of the property. For buyers, it includes fees for processing a mortgage loan, realtor commissions, taxes, insurance premiums, property registration fees, along with charges for other related services they might have availed. For sellers, it includes outstanding loan balance if any, prepayment penalty, taxes, attorney fees, seller broker commissions, etc. You can employ closing cost calculators for buyers and sellers to estimate your respective closing costs.
Typical seller closing costs in the US
Seller closing costs typically range between 8% and 10% of a property’s selling price. For example, if you sell a house for $200,000, your closing costs could be anywhere between $16,000 and $20,000. It may seem like a lot, but it generally depends on the state you are residing in, the mortgage balance you need to pay, realtor commissions, repairs required, etc.
Components of seller closing costs
Here is a list of a few standard payments you can expect to make as closing costs while selling your home.
Broker commission: Real estate agent commission depends on which state you are based in along with the market conditions. However, the average is about 6% in most states.
Transfer tax: Transfer tax is calculated based on the property value and state laws.
Attorney fee or Escrow fee: A fee is paid to the escrow or title agent who handles the closing and gets the documents recorded. If an attorney is required to review the agreements and handle the closing in your state, the fees are paid to the attorney instead.
Outstanding mortgage/equity loans: If you have a mortgage loan on your property, the dues will need to be cleared before closing.
Prepayment penalty: This is charged by a lender when a mortgage is paid off early. This payment is to make up for the interest they would have otherwise received for the remaining term of the loan.
Home transition costs: Sometimes a seller is required to rent a place for a short duration or lease the house for some time till they can move into their new home.
Required repairs: As a seller, you may repair the house before listing it, or may do the same after inspection of the house, depending on the agreement you have with the buyer. Although we believe it is better to do necessary repairs beforehand so that you can have the upper hand during negotiations.
Home warranty: Many times, a seller pays for a home warranty, which enables a buyer to avail of discounted repairs or replacement services. It makes the offer more attractive for a buyer.
Seller Discount: A seller may offer discounts or concessions for a quick closure of the deal. It may be some reduction in price or partial payment of buyer closing costs.
It is recommended you use a seller closing cost calculator to estimate the net proceeds of the sale. You may also check the closing cost calculator for buyer to know all closing costs related to the purchase of a house. It would be extremely useful to know how the costs tally up in case you are thinking of selling off your home and buying a new one simultaneously.
You may visit sites like Houzeo, open door, mortgage calculator, casaplorer, etc. for a reliable home sale calculator.
How you can reduce seller closing costs
Closing costs are not the same for everyone. They depend on various factors as explained above. Therefore, if you change a few factors, it is possible to reduce the costs.
- The title and escrow companies can set their own price points and payments in most states. Thus, it is possible to negotiate and bring down the price to suit your case. You may check and compare the prices of multiple companies to get the best rate.
- You may opt to list your home online under FSBO (For Sale By Owner) instead of employing a real estate agent, and save a lot on broker commissions. However, you need to tackle all aspects of the sale yourself – right from preparing and showing the house to closing.
- Another popular medium for selling your house is through MLS service providers, who provide you a la carte services for selling your home. You may choose only the essential services as per your requirement for a nominal charge or a fixed fee, as in the case of flat fee MLS service providers.
- You may also save on title insurance if you ask for a title insurance reissue rate. In case you have lived in the house for a few years before selling, you are entitled to a reduced rate for the owner’s title insurance policy. If you are paying for the same, this may help reduce the costs.
Closing costs are a mandatory part of a property deal. They may be reduced, but not avoided. Hence, it is suggested to carefully contemplate the costs before moving ahead and closing a deal. Also, compare and negotiate wherever possible to keep them aligned to your pocket.
