If you’re considering your home’s value so that when you sell it,  it will  reap a worthwhile profit, don’t forget to factor in the closing costs for you as the seller.

You may be estimating that you can sell your property for a hypothetical $100,000 and pay off your $50,000 home loan and make $50,000  profit. But before you start making out your deposit slip and calculating the size of the down payment for your next home, you need to calculate the closing costs for seller.

While buyers also pay closing costs, you’ll see a long column on the ALTA (HUD-1) Settlement Statement for seller costs. Closing costs for sellers do vary according to where you live, but as seller you can expect to pay anywhere from 7 percent to 10 percent of the home’s sales price at settlement. This won’t be cash out of your pocket, but rather it will be transactionally funded, that is to say deducted from the proceeds of your home unless you are selling with low equity. In that event, you may need to bring cash to the table.

Loan payoff costs

Your loan payoff may be higher than the remaining balance on your loan because of prorated interest. In some cases, you may have to pay a prepayment penalty for paying off your loan before the end of the term. If you have a home equity loan or line of credit, this must be paid in full at settlement as well. If you were ever late on a payment, the bank has not forgotten, and here is where they will quietly collect it.

Commissions

One of the larger closing costs for sellers at settlement is the commission for the real estate agents involved in the transaction, unless you are selling your house on your own using a MLS-only listing  with someone like us. Commissions are negotiable and vary somewhat by market, but if a typical commission is 6 percent of the sales price of the home, it’s split between the listing agent and the buyer’s agent. For a home that sells for $100,000, the commission would come to $6,000.

Transfer taxes or recording fees

These are the taxes collected by your state or local government to transfer the title from one owner to another.  The transaction will be recorded at your respective courthouse.

Title insurance fees

Sellers typically pay the owner’s title insurance premium.  Around here, it is figured with a fairly convoluted formula, but for less than very expensive houses, you can figure on $100 for the first $1000 of the sale price, and $5 per every subsequent thousand (or portion thereof) for each of the remaining thousands up to the sale price.  This will provide a high but safe estimate for you.  In this case the total would be $595.
The buyer, if having to obtain a mortgage would purchase another title policy for their new lender based on their amount of indebtedness for the mortgage.  This would simultaneously piggy-back on the seller’s policy but would add no fees to the seller.

Attorney fees

If you have your own attorney represent you at the settlement. Market traditions vary, so while in some areas both the buyers and sellers have their own attorneys, in others it’s more common to have one settlement attorney for the transaction. In some areas the buyer pays the attorney fees, while in others the seller pays.
In Tennessee, for example, the two parties split the charges and each party pays its side of the transaction.  These costs are generally competitive from one company to the next, but a seller or buyer could generally figure on spending $300 – $500 on attorney fees and another $200 or $300 on what is called document prep, so guess $500 to $800 for attorney’s fees, not counting title insurance policy fees.

Misc. additional closing costs for sellers

Additional closing costs for sellers include: liens or judgments against the property, repair charges not already paid, unpaid homeowner association dues, prorated property taxes and homeowner association dues included up to the day of settlement.

Depending on the contract, closing costs may also include termite inspection and remediation, if necessary, home warranty premium and repair bills or a credit for repairs for items found during a home inspection, done or to be done.
Lien releases will cost $3 per page times possibly a few pages, and if your existing mortgage is being paid off in the transaction, you will be charged $75 or so for courier fees to overnight the payoff to your old mortgage company.
Also, don’t forget to estimate some of the costs associated with preparing to sell, such as cosmetic repairs or improvements to make your home better for buyers. Those costs may be reflected in a higher sales price, but you might still include them in your calculations, even if they do not show up on the closing statement.