What are seller closing costs? What are the prime components of closing costs that a seller must know about? Read on, to find all the answers. . .
Unlike the sale of a commodity, the sale of an entire real estate property can be a complicated process. There are several legal and financial details that need to be looked into, which add to the total expenses a seller pays for, before closing the deal. It’s essential that a seller knows about the closing costs, that marginally reduce his overall profit. Being a significant component of the overall selling cost, a seller needs to be clear about what all he would have to pay for, to close the deal.
What are Seller Closing Costs?
Ideally, a real estate property sale should involve only one transaction, which is the payment of the property sale price by the buyer. The money transfer is made, they shake hands and the deal is done. If only it would have been that simple! There are several associated fees that both buyer and sellers must pay for, to legitimize the deal. Seller closing costs are the sum total of all fees that are debited from a seller’s account during the closure of a real estate deal. There are many components involved. Here are the most important ones:
Real Estate Brokerage Charges
One of the biggest components of this cost is the brokerage fee paid to the real estate agent, that may be anywhere from 3% to more than 8% of the selling costs. If you find a buyer on your own, your profit potential for the deal will be greater.
Mortgage Pay Off
Any mortgage loans associated with the property need to be paid for, before the deal closes, unless the buyer has agreed to pay for it. A seller must make sure that all mortgages have been cleared before sale.
Legal Fees Involved
You need the services of an attorney, who handles all the legal formalities associated with the deal, including creation of the deed, consultation regarding local taxation and title transfer procedure. Thus attorney fees add to the closing costs, for the seller.
Tax Debt Clearance
Any tax debt and tax liens imposed on the property need to be cleared before the deal closure. Any other utility bills and other taxes associated with the property must be paid for, to pave the way for smooth title transfer.
Title Transfer Related Fees and Taxes
There are taxes associated with the title transfer, according to city and state laws, which make up another addition to the overall closing costs, for the seller.
There are many more associated fees and expenses which include:
- Title Insurance Fees
- Escrow Charges, If any
- Home Warranty Insurance Fees
- Home Inspection Charges
- Compliance Certificate Fees
- Cooperative Society or Home Owner’s Association Fees
- FHA Fees & Mortgage Record Release Fees
Most of the itemized fees that make up the closing costs are unavoidable. The only component, which the seller can avoid paying for are the brokerage fees, by finding a buyer for his property without a real estate agent’s help. You will need the services of a lawyer to oversee all the legal formalities involved.
Once you find a buyer and are ready to go ahead with a deal, calculate the overall closing costs involved and make sure that you arrange to pay for them in advance. That way, you don’t have to worry about any surprise expenses, that you would have to pay for, on the day of title transfer and deal closing. Take help from your lawyer and figure out all the financial and legal details of the property deal, before going ahead.