Closing Costs That Can Cut Into Your Budget

When it comes to selling your home, it's natural to focus on the potential profits of the sale rather than the costs associated with the process. While selling your home can be a profitable experience, there are many expenditures throughout the process that can cut into your budget.

Closing costs are an essential aspect of selling your home that can be especially costly if you're not anticipating them. Let's look at some common closing costs that sellers typically take care of, as well as some closing costs that buyers may ask you to cover while selling your home.  

Seller's Closing Costs

When selling your home, there are certain closing costs that you will likely be required to pay. These costs can easily add up to hundreds or thousands of dollars, so you should always budget for them when selling your home. The seller's closing costs typically include:

• Agent Commissions: In the past, sellers have covered the cost of both the buyer's and seller's agent commissions. Since the new commission ruling, sellers are still responsible for paying their real estate agent, but not necessarily the buyer's agent.
• Transfer Taxes/Recording Fees: These fees pay the sale taxes owed to the government and cover the cost associated with filing the deed of the property into county record under the new owner's name.
• Loan Payoff Costs: These fees may include the loan application, interest, and origination fees.
• Title Insurance Fees: These fees cover an insurance policy protecting the buyer and seller if issues with the title arise after the home sale has concluded.
• Attorney Fees: These fees pay for a licensed attorney to ensure that the home sale documents meet all legal standards when selling your home. 

Buyer's Closing Costs

Not all closing costs are your responsibility when selling your home. Typically, the buyer will cover certain closing costs, which may range from less than one hundred dollars to one thousand dollars or more in fees, including:

• Home Inspection Fee: This cost is associated with hiring a licensed home inspector to assess the property's condition, including the state of its structure, electrical systems, plumbing, and foundation.
• Appraisal Fee: This covers the property appraisal, which offers a report verifying the property value based on factors like the property's condition and size.
• Title Search Fee: This fee is for verifying that the seller is the legal owner of the property and that no claims or judgments are pending on the property.
• Credit Report Fee: Running credit reports through credit bureaus also comes with a fee.

Often the buyer will negotiate for the seller to cover some or all of the closing costs. For example, the buyer may accept a counter-offer from the seller if the seller agrees to cover closing costs. In other instances, the buyer may ask the seller to cover specific costs like the home inspection fee or appraisal fee, especially if these inspections reveal repairs or other investments will need to be made on the home after the buyer purchases it.

Closing costs associated with selling your home may range from one percent to even seven percent of the sales price. Before selling your home, consider speaking with an agent to learn which closing costs you should include in your budget.

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