If you were to sell your house today, what would be the closing costs for you. If you’re considering selling your home, that’s the big question (well besides what price it will sell at) so you can estimate how much money will go back into your pocket after all is said and done. This article will cover the main closing costs for sellers of real estate.
First of all, let’s define closing costs. Investopedia defines closing costs as, “expenses over and above the price of the property, that buyers and sellers normally incur to complete a real estate transaction.” Here are the thirteen main costs when selling your home.
The first closing cost, and sometimes the biggest and most overlooked cost is mortgage pay-off. Owners often forget that they need to pay-off the outstanding debt related to their home. Let me add here, sometimes you may also have to pay a prepayment penalty for closing your loan early so don’t forget that potential cost also.
Second, are the broker commissions. This is typically six percent, three percent to the seller’s brokerage and three percent to the buyer’s brokerage. The commission to each brokerage is further split between the respective brokerage and their agents.
Third closing cost is Staging and other preparation costs. Depending on your sales agreement these costs can either be included in the commissions or paid separately. Besides professional staging it may include photography, video, virtual tour creation, and newspaper advertising. So, work with your Realtor to determine the best marketing strategy for your property to get the biggest bang for your buck.
Fourth is Title insurance. In Hawaii, it is customary for the seller and buyer to split title insurance 60% paid by seller, 40% paid by buyer. You should be able to see these details on your purchase contract.
Fifth are escrow fees. These include items such as title search, preparation of paperwork, and notary fees.
The sixth closing cost are Attorney fees. In some jurisdictions, attorney review is required, as such you’ll need to pay for the service. Also, if there are trusts involved, this also may require attorney review.
Seventh. Conveyance taxes…… Conveyance tax is a tax imposed on the transfer of real property. Traditionally sellers pay conveyance tax but it varies from area to area. In Hawaii, the seller typically pays conveyance tax to the State of Hawaii Department of Taxation and is based on the “actual and full consideration” to be paid, in other words the purchase price. The rates range from 0.1% to 1.25%.
Eighth. Association Documents. If the property falls under an Association of apartment or homeowners, the seller will need to purchase an association document buyer’s packet and provide this to the buyer for their review and approval.
The Ninth closing cost, termite inspection. In the tropical climate of Hawaii, termites are quite prevalent. As such, there’s a good chance that the seller will pay for a termite inspection. Typically, if there is evidence of termites, the seller will have to pay for the treatment as recommended by the third-party inspector. Also, the termite inspector is selected by the buyer for independence.
Ten, Surveying. If you are selling a single-family home, a geographical survey is performed to determine the exact amount of land being purchased, and locate and measure any easements or encroachments on the property. More work may be necessary if issues are discovered.
Eleven, prorated property taxes and association fees. The escrow company will determine and prorate any taxes or fees that the seller gets back or owes because of prepayment or late payment.
Twelve, Seller concessions. During the sales process, the seller may agree to give the buyer a credit for things such as items of disrepair in the home.
Thirteen, Cleaning costs. This negotiable item on the purchase contract will possibly have you, the seller pay a professional to clean the property and shampoo the carpets (if you have carpets). This item is negotiable and like everything else, dependent on the situation.
So those were the thirteen main closing costs for the seller. If you’re selling, make sure to check with your realtor, escrow officer, lender, and or attorney, to find out if these fees will apply to you if you want to accurately determine how much is going into your pocket. They can provide you estimates from the start for their related costs in order to get a better estimate of what you will be netting out at the end of the transaction.
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