Thursday, January 30, 2014

Sellers Closing Costs

If you’re monitoring your home value and maintaining an eagle eye on the remaining balance of your mortgage so you can sell and reap a worthwhile profit, don’t forget to factor in closing costs on your home sale.

You may be estimating that you can sell your property for $350,000 and pay off your $200,000 home loan and reap a $150,000 benefit. But before you start counting your dollars and debating the size of the down payment for your next home, you need to calculate your closing costs.

While buyers also pay closing costs, you’ll see a long column on the HUD-1 Settlement Statement for seller costs. Closing costs vary according to where you live, but as the seller you can expect to pay anywhere from 6 percent to 10 percent of the home’s sales price at settlement. This won’t be cash out of your pocket, rather it will be deducted from the profit on your home — unless you are selling with very low equity. In which case, you may need to bring a little cash to the table.

Seller Costs

One of the larger costs at settlement paid by the seller is the commission for the REALTORS® involved in the transaction. Commissions are negotiable and vary somewhat by market, but a typical commission is 6 percent of the sales price of the home split between the listing agent and the buyers’ agent. For a home that sells for $350,000, the commission would come to $21,000.

Other fees paid for by the seller may include:

  • Loan payoff costs. Your loan payoff will often be a little 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.
  • Transfer taxes or recording fees. These are the taxes imposed by your state or local government to transfer the title from one owner to another.
  • Title insurance fees. Sellers typically pay the owner’s title insurance premium.
  • 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.
  • Liens or judgments against the property.
  • Unpaid homeowner association dues.
  • Prorated property taxes and homeowner association dues up to the settlement date.

Depending on the contract, the seller may also have to pay:

  • Termite inspection and remediation, if necessary.
  • Home warranty premium.
  • Repair bills or a credit for repairs for items found during a home inspection.

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 more attractive to buyers. Those costs may be returned with a higher sales price, but you should still include them in your calculations. Full Article

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