If you're planning to sell your home, take note that buyers aren’t the only ones who have to pay closing costs. Sellers also need to shoulder a variety of closing costs, and it’s something you need to factor into the sale price since most of it will be deducted from the profit on your home.
While closing costs for sellers can differ due to variations in local tax laws and other requirements, you can expect to pay anywhere from 8% to 10% of the home's sale price during closing, according to Zillow.com. It’s important to know about these potential costs to understand your obligations as a seller and avoid unwanted surprises at closing.
One of the most significant closing costs is the real estate agent commission, typically between 4% and 6% of the sales price, split between the listing agent and the buyer's agent.
The real estate commission is usually the biggest fee a seller pays. If you choose For Sale by Owner (FSBO) to avoid paying commission, there’s a higher risk due to the complexities of selling a home. A professional agent guides you through every step and helps ensure you maximize your profit. Commissions can vary by market and are often negotiable, so discuss them upfront with your listing agent.
Sellers typically pay the buyer’s title insurance premium, which varies by state and sales price.
Title insurance protects the new owner and lender in case of issues with the home’s title, such as disputes over ownership or outstanding liens. This one-time payment shields the buyer from financial burdens if title issues arise during or after closing.
A transfer tax is paid when ownership of the home transfers to the buyer. Also called a title fee or government transfer tax, this amount is determined by state laws and can vary widely. Research your state’s requirements to get a better estimate before closing.
In some states, a real estate attorney is required by law to oversee the sale. Even if not required, hiring an attorney is wise for complex transactions, such as distressed properties or inherited estates. Attorney fees should be included as part of your closing costs.
An escrow account is held by a third-party provider to protect both the buyer and seller, keeping funds secure until closing.
Escrow fees cover signing and recording documents, holding purchase funds, transferring funds, copying documents, and notary charges. Typically, these costs are between $500 and $2,000 (1–2% of the sale price) and are usually split 50-50 between the buyer and seller.
Sellers are responsible for prorated property taxes accrued up to the closing date. After closing, the buyer assumes responsibility. This ensures taxes are up to date for both parties.
If your property is part of an HOA, you may need to pay HOA transfer fees during closing. These cover document preparation, updating records, changing security codes, and other administrative costs. You may also need to pay any outstanding HOA dues up to the closing date.
