In order to calculate how much money you will walk away with when selling your home, you will need to know the closing costs. In order to give you an idea, we are giving you an overview of most normal closing costs, as well as how they are calculated. We have even included rough estimates of the costs based on our experiences.
As a side note, if you ever want to find out your exact closing costs (within a very narrow range), let us know, and we will work the numbers up for you!
Settlement or Closing Fee
This is a fee to compensate the title company for facilitating the closing. This changes depending on which title company you use.
This is basically a junk fee that is only charged when an attorney is handling the closing, as opposed to a title/closing agent. This fee is not really necessary, but is a way for the attorney to make more on the closing in our opinion.
This is a fee for the company issuing the title insurance policy.
Owner’s Title Insurance
$5.75/$1,000 up to $100,000; $5.00/$1,000 up to $1million; more calculations on larger sales
This is an insurance policy in case there was ever a title issue in the future. This is calculated with a formula that is based on the loan amount. The percentage charged is bracketed and changes as the loan amount gets larger.
State Tax/Stamps on Deed
This is a fee to Uncle Sam because he can. It is calculated based on the sales price, but is not bracketed like the owner’s title policy.
You are only responsible for the portion of the property taxes for the time of the year that you owned the property. If you sell your house with 2 months left in the year and have yet to pay your taxes, then you will be charged for 10 months worth of taxes at closing. If it were the same situation but you have already paid your taxes, then you will get a refund for 2 months worth of taxes at closing.
If you have a mortgage on your home, your lender may charge a fee to provide an estoppel (details for title an exact figure of what is owed to pay off the loan). Not all lenders charge this, but some lenders are pretty greedy.
This is basically a termite inspection that many lenders require. We have only ever seen this paid for by the seller when the buyer is getting a VA loan specifically. There is a very odd rule for VA loans in which they require a pest inspection and require that the buyer does not pay for it.
Misc Recording Docs
This is a fee to record miscellaneous documents and changes case by case. If mortgages, power of attorney documents, trusts, probates, divorces, etc are involved, then you may have to pay to record some extra documents at closing.
Real Estate Commissions
Last but not least, probably most actually, would be the real estate commissions. It is normal and expected that the seller pays for all real estate commissions. A standard commission would be 3% for the seller’s agent and 3% for the buyer’s agent. If your home is a high end home, this percentage can sometimes be slightly lower since the dollar figure is higher. If your home is in the $100k range, you may need to pay a higher percentage since the dollar figure is lower.
When you are ready to sell your home, choose an agent who is not focused on getting your business, but is instead focused on getting you results. Call us today or contact us online to get started!
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