How to Avoid Home Seller Costs in 5 Easy Steps!
You’ve likely heard about home seller costs, but do you know everything they include and who should pay them? There’s no denying that closing costs for a seller are an inevitable part of selling a home; they encompass all the fees that need to be paid at the closing table. However, the party responsible for paying the home seller fees can vary depending on house sale contract negotiations and your buyer. These are important factors to weigh if you want to sell your house fast for cash without paying the average closing cost on a house.
- Home seller closing costs can range between 6%-10% of the purchase price of the home.
- Determining who will pay home sale closing costs can be negotiated between the buyer and the seller.
- Selling to a company who buys houses for cash is an easy way to avoid paying all closing costs.
1. Learn What Home Seller Costs Specifically Are
When buying or selling a home, there are closing costs, including real estate broker fees, fees connected to a lender, title charges, and transfer fees. Some closing costs are static, while others vary based on the purchase price of the home, such as transfer tax and recordation fees. All settlement fees are broken out line by line on the HUD-1 Settlement Statement, which is executed by the title company. Note that home seller closing costs can change depending on where you live and the type of home bought/sold (i.e., house vs. condo).
If an agent is involved in the real estate transaction, the agents’ commissions will be paid at closing. This includes both the buyer’s agent and seller’s agent commissions (typically 2%-3% of the sales price per agent). If no agents were involved in the sale or purchase of the home, the real estate agent fees are zero.
Traditional Closing Costs for Sellers and Buyers Associated with a Buyers Loan
Buyer’s loans require fees. The cost of these is paid at closing. If the buyer purchases the home in cash (i.e., no loan) the home seller closing costs are $0
Main Aspects of Realtor Fees and Closing Costs
- Closing costs are the fees and charges in excess of the purchase price of the property due at the closing of a real estate transaction.
- Both buyers and sellers may be subject to various closing costs.
- Closing costs may include fees related to the origination and underwriting of a mortgage loan, real estate commissions, taxes, insurance premiums, and title and record filings.
- Closing costs, by law, must be disclosed in advance to buyers and sellers and agreed upon/negotiated before a real estate deal can be completed.
Numerous Types of Fees Paid at Closing
All the closing costs will be itemized on a loan estimate and closing disclosure. Here are some 29 closing costs that we have researched for you of the standard fees. One way or another, buyers and sellers can expect to share when the buyer uses a mortgage loan to purchase a seller’s property. Please note that not all these fees can or will be exclusive to buyers. Bear in mind that some of these fees will be shared or transferred to the seller in one form or another at the negotiations table between the involved parties (seller and Buyer). There are many expenses involved with a buyer’s mortgage loan, and it is in the buyer’s best interest to find a way to transfer as many of these fees onto the seller as possible.
Below is an unordered list of 29 numerous realtor fees and closing costs that we have researched for you as part of our FREE educational resources offered to sellers by our company.
Realtor Fees and Closing Costs 1-7 of 29
- Application Fee: A loan application fee may be charged by the lender to process a buyer’s mortgage application.
- Attorney Fee: In other words, this is a lawyer fee for buying a house charged by a real estate attorney to prepare and review the home purchase and sale agreement and house sale contract. This fee is applied at the discretion of a seller or buyer, and each party has the option of whether to hire an attorney. This is considered a best practice in regard to providing legal protection for either party. For more information, follow this lawyer fee for buying a house.
- Closing Fee: Also known as an escrow fee, this is paid to the party who hosts the closing documents, which could be the title company, an escrow company, or an attorney, depending on state law. This fee is not optional, as state law mandates a neutral third party to handle the legal documentation necessary at closing.
- Courier Fee: If you’re signing paper documents, this fee helps expedite their delivery to the involved parties. If the closing is handled electronically, you might be subject to this fee.
- Credit Report Fee: This is a charge necessary in pulling the buyer’s credit reports from the three main reporting bureaus. Some lenders might not charge this fee because they build it into any of the various other fees.
- Escrow Deposit: Most lenders require the buyer to deposit two months of property tax and mortgage insurance payments at closing into an escrow account.
- FHA Mortgage Insurance Premium: FHA loans require an upfront mortgage insurance premium (UPMIP) of 1.75% of the base loan amount to be paid at closing (or it can be rolled into the buyer mortgage). There’s also an annual MIP payment paid monthly that can range from 0.45%-1.05%, depending on the loan’s term and base amount.
Realtor Fees and Closing Costs 7-14 of 29
- Flood Determination and Monitoring Fee: This is a fee charged by a certified flood inspector to determine whether the property is in a flood zone, which requires flood insurance (separate from a buyer’s homeowners insurance policy). One aspect of the fee includes ongoing observation to monitor changes in the property’s flood status over time.
- Homeowner’s Association Transfer Fee: If you sell a townhouse, condominium, or property in a planned development, the buyer must join that community’s homeowner’s association (HOA). This is the transfer fee that pays the costs of switching ownership, such as document costs. Whether the seller or buyer pays the fee may or may not be in the real estate purchase contract; always check in advance.
- The seller will have to provide documentation showing HOA dues amounts and a copy of the HOA’s financial statements, notices, and minutes. A savvy buyer will be asking the seller to see these documents as well as the covenants, conditions, and restrictions (or CC&Rs), bylaws, and rules of the HOA before they buy the property to ensure the property is in good financial standing and a place that the buyer wants to live. Bear in mind that, if the buyer finds anything unfavorable upon inspection of the documents, they will likely use this as leverage in price negotiations or bail out of the deal altogether.
- Homeowners Insurance: A lender usually requires the buyer to make prepayment of the first year’s homeowners insurance premium at closing.
- Lenders Title Insurance: This is an upfront, one-time fee paid to the title company that protects a lender if an ownership dispute or lien arises that was not found in the title search.
- Lead-Based Paint Inspection: A savvy buyer will exercise the option to pay a certified inspector to determine if the property has hazardous, lead-based paint, which is possible in homes built before 1979. It can cost as much as $700. Bear in mind that this is additional negotiations leveraged on part of the buyer if the property fails the inspection.
- Points: Points (or discount points) refer to an optional, upfront payment made by the buyer to the lender to reduce the interest rate on their loan and, thereby, lower the buyer’s monthly payment. One-point is the equivalent of 1% of the loan amount.
- Owners Title Insurance: A title insurance policy protects the buyer in the event someone challenges their ownership of the home (after the buyer takes ownership of the title). It is usually optional but highly recommended by legal experts. It usually costs 0.5%-1% of the purchase price.
Realtor Fees and Closing Costs 14-21 of 29
- Origination Fee: The origination charge covers the lender’s administrative costs to process the buyer’s fees and is typically 1% of the loan amount. Some lenders do not charge origination fees, but if they don’t, they usually charge a higher interest rate or bury it into any of the other numerous fees to cover costs.
- Pest Inspection: This is a fee that covers the cost of a professional pest inspection for termites, dry rot, or other pest-related damages. Some states and some government-insured loans require the inspection. It usually costs about $300.
- Prepaid Daily Interest Charges: This is a payment to cover any pro rata interest on the buyer’s mortgage that will accrue from the date of closing until the date of the buyer’s first mortgage payment.
- Private Mortgage Insurance (PMI): if the buyer’s down payment is less than 20%, their lender could require PMI, and they may be required to make the first month’s PMI payment upfront at closing.
- Property Appraisal Fee: This is a required fee paid to a professional home appraisal company to assess the home’s fair market value used to determine the buyer’s loan-to-value (LTV) ratio. It usually costs between $500 and $800.
- Property Tax: At closing, the buyer can expect to pay any pro rata property taxes that are due from the date of closing to the end of the tax year. The seller can expect to pay any past due property taxes up until the date of closing.
- Rate Lock Fee: This is a fee charged by the lender for guaranteeing the buyer a certain interest rate (locking in) for a limited period of time, typically from the time they receive a preapproval until closing. It can run from 0.25%-0.5% of the loan value. If a lender offers a rate lock for free, they simply just bury the expense into one or more of the various fees.
Realtor Fees and Closing Costs 21-29 of 29
- Real Estate Commissions: Otherwise known as “realtor fees and closing costs,” this is one of the largest fees for both buyers and sellers’ real estate commissions. Buyers typically don’t pay this fee, though; sellers do. The commission charged by a broker is often 6%-8% of the home’s gross purchase price; this fee is then split evenly between the seller’s agent and the buyer’s agent. These fees can, however, be negotiated to make a deal close.
- Recording Fee: A recording fee will be charged by your local government recording office, typically a city or county clerk’s office, for the official processing of public land records. It is usually about $250.
- Survey Fee: This is a fee charged by a surveying company to inspect property lines and shared fences to confirm and document a property’s boundaries. This fee generally costs between $400 and $700; though, it can be more expensive if the property is large or has unusual boundaries that are more difficult to survey.
- Tax Monitoring and Tax Status Research Fee: This third-party fee is necessary for keeping tabs on buyer property tax payments and notifying the lender of any issues with property tax payments, (i.e., late or failed payments). The cost changes depending on where the property is located and the company the lender employs.
- Tittle Search Fee: This is a fee charged by the title company to analyze public property records for ownership discrepancies. The title company searches deed records and ensures that no outstanding ownership disputes or liens exist on the property. It generally costs between $300 and $600.
- Transfer Tax: The transfer tax may be levied, depending on the jurisdiction, when the title is handed over from the seller to the buyer. This cost varies geographically.
- Underwriting Fees: Underwriting fees are charged by the lender for the work that goes into evaluating the risk associated with taking on the buyer’s loan. Underwriting is a research process of verifying and vetting the buyer’s finances, income, employment, and credit information for final loan approval. It can cost as much as $1,000.
- VA Funding Fee: If your buyer is a VA borrower, this fee is charged as a percentage of the loan amount; this fee is necessary to offset the loan program’s costs to U.S. taxpayers. The amount of the fee depends on the buyer’s military service classification and loan amount. It can be paid at closing or rolled into mortgage.
2. Understand the Bottom Line
When selling a home through traditional methods, closing costs for the seller are unavoidable. Above all, be your best advocate and understand that buyers and sellers can negotiate who pays for the home seller fees, and the various home seller costs can be documented in the purchase and sale agreement and signed by both parties prior to closing. Know that estimating closing costs will typically range anywhere between 8%-10% of the purchase price of the house.
While buyers will usually pay for most of the home sale closing costs, it is important to note that, typically, sellers pay the commission for both real estate agents. When selling with an agent, this commission will be about 5%-6% of the final sale price for both the buyer’s and seller’s agents.
Other than your possible mortgage balance, agents’ commissions are the biggest cost when it comes to payments at the closing table. As a seller, you will also need to pay your share of the year’s property tax up until the day of closing. Any HOA fees or other community costs should be prorated and paid at this time as well.
3. Learn How to Negotiate Seller Subsidies (closing fees for seller)
Seller subsidies are an amount the seller agrees to pay toward closing costs. These subsidies are negotiated between the buyer and seller. For example, a seller can offer to put 3% (seller agent fees) toward closing to help relieve some of the costs for the buyer and get the deal closed. Overall, paying these subsidies is often a small price to pay to bring retail buyers to the table.
4. Learn Selling Strategies to Lower Closing Costs
Selling your home For Sale by Owner (FSBO) allows you to lower closings costs by removing the seller’s real estate agent commission. As the seller, you take on the role and responsibility of the agent from marketing the home to negotiating terms, conditions, and price with various potential buyers. If your buyer is not working with an agent (typically a real estate investor), you can save the agent’s commission on the buyer side of the transaction.
The savings of an agent commission can add up to 5%-6% of the sale price. However, remember to account for the cost experience and know how involved you need to be with marketing your own home when selling FSBO. Marketing can include professional photography, a flat fee MLS listing, attorney fees to draft a purchase and sale agreement, home staging, and an appraisal to determine the ballpark value for your home.
In addition, selling for sale by owner is much more challenging and difficult than selling with an agent, so it’s important to account for the additional mortgage payments, insurance, property taxes, and utilities that need to be paid (holding costs) while waiting for the home to sell. Although a successful home sale by owner can lower the typical closing costs for seller, it will cost you time and effort involved with learning strategies that will be necessary for taking on these responsibilities so they work efficiently and effectively. Know that most FSBO attempts ultimately fail in one capacity or another.
5. Look for Alternative Options to Avoid Home Seller Costs
By working with a direct cash home buyer such as We Buy Houses in WDVM, you can avoid paying ALL closing costs. Our company does not only cover both buyer and seller closing costs, but we also offer all our services (i.e., market and deal analysis) 100% FREE. We pick up all costs and pay cash, which will save you time, money, and hassle at the closing table.
If you are a homeowner interested in selling your house without closing costs and skipping all the hassles of selling the traditional way, fill out our form below or give us a call!
About Justin Mitchell
Justin is the owner and operator of “We Buy Houses In WDVM.” He is experienced at finding solutions for people who are in the market to sell their home or investment property quickly for any reason.
Justin has experience with all types of buying and selling scenarios and understands how to make every transaction simple and stress free. We are certain that Justin can find a win-win solution for you, whether it be a quick cash purchase or other type of creative selling solution.
Justin’s is a legitimate house buyer that has a 5-Star rating on Google Reviews. Visit his Beat Any offer page to see why he believes in presenting sellers with more than just opinions of his satisfied customers. So that you can Understand why facts matter more than opinions when it comes to creative ways to sell a house fast.