What are the Closing Costs of Selling a Home?

Selling a home requires more time and effort than many people realize. When closing day rolls around, it's time to pay the people who helped along the way. From attorneys and contractors to Uncle Sam, there are plenty of people who will be lining up to take their cut before the deal is done. 

When you're estimating the profit you'll see from your home sale, it's important not to forget about the closing costs you'll pay. While the final costs vary based on several factors, including where your home is located, most sellers can expect to allocate between 6% and 10% of the home's sale price to closing costs. Here's an overview of what you can expect. 

• Loan Payoff Expenses
  When you sell your home, you'll have to repay your mortgage lender at closing. You may notice that your final payoff balance is higher than the remaining balance shown on your mortgage statement. The difference is the pro-rated interest you owe your lender. Some lenders also charge an early-payment penalty. If you have an outstanding balance on your home equity loan or line of credit, you'll have to pay that in full as well.

It's always a good idea to contact your lender and get an estimate of what you'll owe so you can properly prepare.

• Transfer Taxes/Recording Fees
  In some locations, sellers are required to pay a transfer tax or recording fee, which is calculated based on your property value. This tax or fee may be levied by your state, county, or city. It covers the cost of transferring your deed to the new owners.
  
  
• Title Insurance Fees
  Title insurance protects the buyers and their lender from any problems that could arise with the property's title. The sellers often pay the buyer's title insurance premium as part of the closing costs. Make sure to talk to your real estate agent about common practices in your area.
  
  
• Escrow Fees
  The escrow company is the party responsible for handling the transfer of documents and funds during a real estate transaction. If there are third-party escrow fees to pay, the buyer and the seller will often split them. Your portion will be added to your closing costs.
  
  
• Attorney's Fees
  If you've hired a real estate attorney, their fees will also be included in the closing costs. In some states, attorneys are required to oversee real estate transactions, while in others, they're optional.
  
  
• Property Taxes
  There's a chance you'll also have to pay all or a portion of the previous year's property taxes. This will depend on the time of year you sell your home and where you're located.
  
  
• Real Estate Agent Commission
  Your real estate agent works hard to help you sell your home, and now is the time to pay them as well. The amount you'll owe your agent will be based on your home's selling price. You can find the percentage you've agreed to in your listing agreement.
  
  
• Additional Closing Costs
  There's also a possibility you may run into additional closing costs. This may include any outstanding homeowner's association (HOA) fees, a home warranty premium that you pay for the buyer, credits to buyers for repairs found during the inspection, and more.

You should be able to receive a full estimate and breakdown of your closing costs before your scheduled closing day. Make sure you review it closely. This will allow you to ask questions so you understand everything you're expected to pay. Taking the time to do this will ensure you're prepared and help prevent any unpleasant last-minute surprises. 

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