Closing Costs for Sellers in real estate transactions is a subject of debate. Mostly around whether the seller is supposed to pay closing costs considering that he/she is not the most affected by an infringement to the property title. The process of buying a property has some technicalities and you might find yourself immersed in unfamiliar waters you didn’t envisage. According to Zillow research, 61% of house sellers are first-time sellers, and the closing phase might be quite confusing. One of such concepts is the closing costs. the purpose of this article is to explain the concept of closing, the costs, and the obligations a seller might face when selling a property especially in relation to closing costs.
Bit of a background
The closing phase is the part of the real estate transaction when the money and documents are exchanged with an intention to transfer title to the buyer. Closing costs are the sets of fees paid by both buyers and sellers at the end of a real estate transaction. Typically, the buyer carries a lot of the closing costs. for the buyer, the closing costs include the listing and buyer’s agent’s commission, mostly around 6% of the sales price in total.
What Closing Cost Means For sellers
Closing Costs for Sellers can include the following:
- Title Insurance Premiums: Sellers usually pay the title insurance premium to protect the new owner from prospective issues in relation to the title. This insurance payment protects the buyer from the financial burden of settling a title dispute in court.
- Transfer Taxes And Recording Fees: Transfer Taxes are basically government transfer taxes or title fees, they are the taxes you pay when the title in the property is transferred from owner/seller to buyer at the closing stage of the transaction.
- Prorated Property Taxes, HOA Fees, and other outstanding bills: As a homeowner, you are required to pay property taxes to the state, some states accept payments twice a year. During the closing stage, the seller will be required to pay outstanding or due property taxes till the moment the title is transferred to the buyer. If your house is located in a community that works under a Homeowners Association (HOA), you’ll be required to pay for all outstanding dues to HOA before the property is transferred. Some HOAs might charge a transfer fee when you’re passing the title in the property to the buyer. The seller will also be required to pay all outstanding bills on the property before transferring the property.
- Agent and Attorney Costs: attorneys are required to oversee the closing stage of a transaction in some states, In states where it is not compulsory, it’s considered good practice and the attorney is paid out of the proceeds of the property. A settlement fee is also paid to the escrow or title agent who oversees the closing stage of the transaction.
The closing costs paid by the seller could vary based on the negotiating power of the parties to the transaction, at times to sweeten the deal, the seller grants the buyer what is called a seller concession which means assisting the buyer with the closing costs. If you need help finding valuable properties that offer high yield returns, check out our reliable skip tracing software here.