When you purchased your first home, it was an exciting time. Now that it is time to sell your home, there are a few things that are truly different from when you purchased your home. One of the biggest changes is the fees that you will need to pay at closing. These fees are your Closing Costs. Closing Costs are expenses that you pay that are over the purchase price of the property. In a Real Estate transaction, the Seller and the Buyer both have these fees, but the expenses that the Seller and Buyer are different from one another. As the seller, here is a list of expenses that you will need to pay when selling your home.
The Biggest Expense: Agents Commission
One of the biggest costs you will have when selling your home is the commission that you pay to your Real Estate Agent. This will usually be 5% or more of the value of the home. This expense should not be taken lightly, your Real Estate Agent will be sure to get top dollar for your property and make sure you are completely taken care of in every aspect of the selling process.
Don’t worry, you will not have to pay for your Real Estate Agents commission in cash. The commission will be paid out of escrow from your Seller Proceeds. Also, something else to be aware of is that your agent will not be getting this full commission, it is customary that the Buyer’s Agent receives a 2.5% or 3% commission.
The most common costs in addition to the commission are:
1. Loan payoff fees
Your mortgage loan payoff will be paid through Escrow, during the escrow process your Escrow Officer will request your loan payoff demand from your mortgage company. Your mortgage will need to be paid in full to transfer the title of your property free and clear. If you have any lines of credit attached to your loan, that will be paid through escrow as well.
Before selling your home, one of the things you should do is contact your mortgage company or review your last statement to see how much you still owe on your loan so there are no surprises.
2. Transfer taxes and recording fees
State or local governments will usually charge a tax and fee to transfer the title for the property from one owner to another. These fees will be provided to you during the escrow process.
3. Title insurance fees
Title insurance protects the owner of the property and the mortgage lender against future claims for any unknown issues with the title to the property at the time of sale. Issues may include fraud, forgery, unpaid property taxes, judgments, liens, or other encumbrances that were not discovered during a search of the property’s title history, which should have been conducted thoroughly before the sale.
Sellers typically pay the owner’s title insurance premium, as an undertaking that they have been honest in all their dealings regarding the sale.
4. Escrow Fees
The Escrow Fees are commonly based on the purchase price of the home. In some states, they use Attorneys to process Real Estate transactions, but in California, we use Escrow Offices to process Real Estate transactions. Escrow fees can vary depending on the Real Estate Transaction itself, these fees can change throughout the processes of the transaction. One advantage of working with an Escrow Officer at Oakwood Escrow is that we have the Oakwood One Rate Escrow Fee so that there are no surprises at the end of your transaction.
5. Additional closing costs
Additional closing costs for sellers can include outstanding matters related to the property, such as:
* Tax liens or judgments against the property
* Unpaid homeowner association dues
* Pro-rated property taxes up to the date of the sale
* Back taxes
These are the main closing costs that you will need to be aware of when selling your home. I know these fees/expenses seem like a lot, but you can always get an estimate from your Real Estate Agent or Escrow Officer at any time. Your estimate will include all of the fees listed above (you will need to provide the amount that you owe on your mortgage) so that you can see an estimate of your Seller Net Proceed that you will receive at the close of your transaction. If you need an estimate, please feel free to contact any of the Escrow Officers at Oakwood Escrow and they will be more than happy to provide you with an estimate for your property.