Selling a Home: The Cost of Closing

Selling a home involves more than just deciding on a listing price and hoping for a profit. There are many factors to consider when it comes to selling your home, and cost is perhaps the greatest one at hand. Many homeowners don’t realize how expensive selling a home can be until they’re too deep into the process to back out. The following is a guide to the many costs involved in selling a home, from the obvious to the unfortunate surprises.

Realtor’s commission
When it comes to selling your home, your realtor’s commission is one of the biggest expenses you’ll face. Realtors will typically take a five percent commission on the sale price of your home. In a booming housing market, you’d possibly be able to negotiate that fee down to four percent, but in today’s depressed housing market, don’t expect a good realtor to go any lower than the fee that he or she initially quotes.

Legal fees
You’ll need an attorney to negotiate your sale contract and take care of all legal matters pertaining to the sale of your home. While these fees are usually higher for the buyer, you should still expect to shell out some money for the legal side of things. Many real estate attorneys will quote you a single price for the entire closing, as opposed to billing you by the hour; it’s usually best to go for the flat fee. Feel free to shop around for a good deal, but don’t skimp on service. When it comes to legal matters, you get what you pay for, and spending a bit more on a good attorney could save you money on the sale of your home down the road.

Real estate transfer taxes
A classic hidden whammy, real estate transfer taxes can easily eat up a nice portion of your home sale profit. While real estate transfer taxes vary from state to state, you should expect to be charged a minimum of one percent of the sale price. Sure, one percent might not sound like a lot, but if you’re selling a home for $400,000, then that leaves you with a $4,000 payment at closing. Ouch.

Early payment penalties on your mortgage
It’s hard to believe, but some mortgage companies charge a penalty for making early payments on a mortgage. Once you sell your home, the proceeds are immediately used to pay off whatever outstanding amount you have left on your loan. Unfortunately, you might get slapped with a fee as a result. Contact your mortgage company and ask for a payoff statement to get a sense of what fees the early payment might entail.

Inspections and paperwork
It is the seller’s responsibility to obtain all of the necessary paperwork for the sale of a home. This includes the Certificate of Occupancy, which states that the home in question is in suitable condition to be lived in. In order to obtain this Certificate, a home inspection is required to ensure that your home is up to code. Naturally, this service comes with a fee that can range from under one hundred dollars to several hundred dollars depending on the location and timeframe at hand.

Repairs, Part One
When it comes to selling a home, there are two types of repairs: the kind that are absolutely necessary, and the kind that the buyer requests. A necessary repair is one that must be completed in order to qualify for a Certificate of Occupancy. If you own an older home, then you’ll probably find that certain repairs are in order due to changes in your town’s housing code over time. These repairs might include updating the electrical outlets and adding proper ventilation to certain areas of the home. Keep in mind that necessary repairs are not limited to the interior of your house. For example, you might be forced to fix cracked or poorly-maintained sidewalks outside your property in order to obtain your Certificate of Occupancy. Any demands made by your home inspector are, unfortunately, non-negotiable, so be sure to budget accordingly.