Learn how much closing costs are for sellers. Get a detailed breakdown of typical fees and expenses to expect when selling your home.
Selling a home is a major undertaking. It’s a huge life move—whether you’re selling your first home or you’ve been down this path a time or two—but it’s also a big financial move. Navigating the process with poise can help preserve your financial well-being for years to come.
One aspect often overlooked by sellers is real estate closing costs. While buyers are generally the ones with more closing costs to pay, sellers have their fair share, as well. But how much are closing costs for sellers? Read on as we answer this question and other common seller queries.
When a real estate transaction is finalized, a number of fees and expenses are due. Some cover the cost of entering the transaction into the public record, while others go toward things like mortgage interest. Combined, these fees are known as closing costs.
Closing costs differ greatly for home buyers and sellers in more ways than one. For starters, buyers’ closing costs typically come in addition to the purchase price of the home, which can add salt to the wound for buyers who just purchased a pricey piece of real estate. Sellers, on the other hand, have their closing costs deducted from their sale proceeds. This can take some of the sting out of paying for closing costs.
The other difference comes in the amount buyers and sellers pay in closing costs. Buyers can expect to pay between 3 and 6 percent of the home’s value in closing costs, while the cost for sellers can be closer to 10 percent.1 But this comes with an important caveat: most of these costs are in real estate broker commissions. Subtracting this cost, either by selling your home as for sale by owner (FSBO) or using a reduced-commission listing site, can make closing costs for sellers lower than those of home buyers.
Discover more on how to pay closing costs in our guide.
So, what do closing costs include? Now that we have a better understanding of closing costs, let’s examine the different types of closing costs sellers can expect to see.
As noted, both seller and buyer closing costs carry a wide-ranging potential price tag. This is because several factors influence costs, from geography to the amount of negotiation that takes place throughout the sale. Let’s examine the variables that have the greatest overall impact on closing costs.
Your location will play a vital role in determining your overall closing costs. The reason for this variation comes largely down to taxes. Since different states have different tax policies and laws, closing costs like transfer taxes can fluctuate wildly. Sales in states like Kansas and Missouri won’t incur transfer taxes at all. But in a place like Florida, where the rate is 70 cents for every $100, transfer taxes can be in the thousands.3 Pay close attention to local laws when planning for closing costs to understand how your sale may be impacted.
The sale price of your home will dramatically impact your closing costs in several key ways. For starters, any real estate agent commission fees will be a percentage of the overall sale price. The higher the price, the more fees will be paid. Transfer fees and property taxes will also increase with price. Fortunately, not all closing costs are linked to price, but the sale price of your home will still play a valuable role in determining your closing costs.
When drafting a loan estimate for buyers, mortgage lenders frequently include a list of third-party vendors and providers for services like title searches, home inspections, and other buyer-side closing costs. These can impact sellers, especially if a buyer’s closing costs become part of sale negotiations. Rarely will a lender’s chosen vendors be the best deal, so it’s important for sellers to comparison-shop different providers to minimize their closing costs.
The state of the housing market can also weigh heavily on sellers’ closing costs. In a seller’s market, where demand is high and inventory is low, buyers may have little bargaining power. But when inventory is high and demand is low, sellers (and their agents) may need to work harder to get their property to move. This is where negotiation comes into play, and closing costs typically reserved for buyers may become the responsibility of a seller through bargaining.
Given the high variability of closing costs and the myriad variables influencing them, it can be challenging to estimate them accurately. However, there are resources available that can help you predict these costs and create a budget to tackle them.
The simplest way to estimate closing costs is to do the math based on the typical range. Multiply your home’s value or expected sale price by the range of 6 to 10 percent, overbudgeting to ensure you’re on the safe side when it comes time to close.
You can also use online calculators to estimate your closing costs based on your home’s value, the state of the market, and your location. This will get you closer to a precise estimate, which will allow you to budget more accurately.
If you choose to sell your home with a real estate professional, they’ll be able to provide you with an estimate based on years (or even decades) of experience paired with in-depth knowledge of past real estate transactions.
As for budgeting, it’s important to reiterate that seller closing costs generally come out of the sale proceeds, unlike buyer closing costs which are in addition to the purchase price. Still, the home seller may want to budget for these costs to ensure their earnings from the sale are enough to support future goals. To do so, get a ballpark estimate as early as possible, building these expected costs into an existing budget and earmarking them from your proceeds before the sale has been finalized.
Considering closing costs directly impact the net proceeds from your home’s sale, a clear understanding of these costs can help you organize your finances and ensure your future goals are met. To do so effectively, let these three tips be a starting point.
When you sell your home, you will walk away with your net proceeds. To calculate these proceeds, subtract any estimated closing costs from your expected sale price—along with the amount owed on your home, if any. This will give you a clearer idea of your actual earnings, helping you shop for your next property or plan your next move.
While not part of your closing costs, capital gains taxes can greatly impact some sellers. If your property has seen a significant increase in value since you bought it—over $250,000 for single taxpayers or $500,000 for married couples filing jointly—you may owe taxes on anything over the allowance. Be mindful of these potential taxes when listing your home to plot the way forward strategically.4
It’s important to consider how your sale proceeds will be applied well before the sale has concluded. As mentioned earlier, this can mean shopping for your next property, but for some sellers, it may mean exploring a healthy contribution to a retirement fund.
If you’re not planning on rolling your earnings into a new property, or simply want some time to figure it out, Truehold’s sale-leaseback may be a valuable asset in your reinvestment planning. This sell-and-stay tool allows you to sell your home and access your home equity, then remain as a renter. Whether this is a temporary solution or a long-term financial strategy is up to you, but the flexibility it provides can help make your next move the right one.
Some typical closing costs will be unavoidable, but as a seller, you can take steps to minimize them.
Depending on market conditions, you may be able to negotiate with the potential buyer to reduce your closing cost burden. This strategy is best suited for a seller’s market, but there are some instances where sellers may be able to negotiate even in a buyer’s market.
As mentioned above, the third-party providers recommended by mortgage lenders won’t always be the best deal. It’s often in your best interest to do your research to find alternative vendors and potentially lower your closing costs.
One of the best ways to reduce your average closing costs is to forgo the traditional sale process altogether. With Truehold’s sale-leaseback, the transaction is dramatically simplified—instead of a list of closing costs and an unpredictable range, a 5.5 percent transaction fee is your only expense. Plus, rather than taking months to list a home, negotiate, and close on the sale, you can expect the process to take as little as 30 days.
In closing, seller closing costs can range dramatically, but there are ways to anticipate these costs and reduce them. And with the simplicity and ease of Truehold’s sale-leaseback, there are even ways to avoid the confusion of closing costs altogether.
Want to learn more about a residential sale-leaseback? See how stress-free selling your home can be by connecting with one of our expert advisors today.
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