Who pays closing costs buyer or seller?

Who pays the closing costs—buyers or sellers? The thing is, it's not fixed in stone and can change depending on a variety of things. It all comes down to discussions, the local market, and what is agreed upon in the purchase agreement. Sometimes buyers pay the majority of the closing costs, while other times sellers pay a larger portion. There is no one-size-fits-all solution. The best thing to do is talk with your real estate agent or lawyer about the specifics of your scenario and who is accountable for what when it comes to closing costs.

How much will a home seller pay at closing?

While buyers usually bear the brunt of the costs when buying a home, sellers aren't off the hook entirely. When you're getting ready to sell your home, it's essential to remember that there are closing costs involved. These are the fees associated with finalizing the sale and transferring ownership. Now, here's the thing—closing costs can vary depending on which state you're in and the specifics of your transaction. But don't worry, we're here to give you a closer look at the typical closing costs that sellers encounter. Let's dive in!

1. Title insurance: Protecting your interest

First up is title insurance. This is a big one because it protects both you (the seller) and the buyer from any legal messes that might pop up related to property ownership. While the buyer usually gets their own policy, you're often the one responsible for providing their title insurance. The cost can vary depending on factors like your property's value and location. It's a good idea to reach out to a reputable title company for an accurate estimate based on your situation.

2. Real estate agent commissions: Paying for expert help

Chances are, you'll be teaming up with a real estate agent to help you sell your home. They'll be your guide throughout the home-selling process, but here's the thing—they don't work for free. Real estate agent commissions are part of the closing costs, and it's typically the seller who foots the bill. These commissions are usually a percentage of the final sale price, and the specific rate can vary depending on your agreement with the agent. Keep this cost in mind when calculating how much money you'll pocket from the sale.

3. Attorney fees: Expert advice on your side

Now, attorneys might not always be necessary, but they can be a huge help when it comes to dealing with legal stuff during a home sale. Having an attorney review the sales contract, negotiate terms, and ensure everything runs smoothly can save you a ton of headaches. Attorney fees can differ based on the complexity of the sale and the rates charged by the attorney you work with. For a clear picture of potential fees in your situation, it's best to chat with a real estate attorney.

4. Transfer taxes: Uncle Sam wants a slice

Ah, transfer taxes—the lovely fees imposed by the government when ownership of a property changes hands. They're calculated as a percentage of the sale price, and the exact amount varies depending on where you live. Do some research to find out the specific transfer tax regulations in your area. That way, you'll have a better idea of how much you'll owe.

5. Home inspection and repairs: Uncovering your property's condition

Sometimes, buyers request a home inspection to get a better understanding of the property's condition before sealing the deal. As the seller, you might be on the hook for covering any repairs that crop up as a result. The extent of repairs needed and the associated costs can vary greatly depending on your home's condition. Be sure to budget for potential inspection and repair expenses to avoid any surprises during the closing process.

6. Other potential closing costs: The extras

While we've covered the main closing costs, it's essential to remember that other expenses might pop up during the home-selling process. Here are a few more to consider:

• Escrow fees: These cover the cost of a neutral third party overseeing the transaction.

• Home warranty fees: Some buyers might ask for a home warranty, and you might be responsible for the fees associated with that.

• Homeowner association (HOA) fees: If your property is part of an HOA, there might be fees to take into account.

• Outstanding property taxes: Don't forget about any unpaid property taxes that need to be settled.

It's crucial to chat with a real estate professional to get a complete picture of all the potential closing costs based on your unique circumstances.

Here is a summary of some of the closing costs that sellers typically incur:

Data sources:  The Mortgage Reports  and  My Mortgage Insider

When are closing costs due?

Closing costs are typically due at the time of closing. That's when everything's getting wrapped up, and all the paperwork is flying around. It's like the grand finale of the real estate transaction. Now, as the seller, you'll need to have those funds ready to roll when the time comes.

The law says that both the buyer and seller have to get closing documents three business days before the big day. These documents lay out all the nitty-gritty details of the transaction and include a list of all the closing fees. The exact details of payment might depend on local customs and what's written in your purchase contract. To make sure you're all set, it's a good idea to stay in touch with your real estate agent or lawyer. They'll guide you through the process and make sure you've got your closing costs covered at the right moment.

How to reduce closing costs?

Reducing closing costs can be a smart way to save some extra cash. Here are a few tips to help you minimize those expenses:

Shop around like a pro: Don't settle for the first lender, title company, or insurance provider you come across. Take the time to compare prices and negotiate. Getting multiple quotes will give you the upper hand in finding the best rates and possibly saving on closing costs.

Talk it out with the buyer: Negotiation is the name of the game. Depending on the market and your skills, you might be able to ask the buyer to cover your part of the closing costs. It's worth a shot, right?

Talk it out with your real estate agent: Consider asking your real estate agent if they're open to a lower commission or explore working with an agent who offers discounted services. Just keep in mind that reducing the agent commission might result in less marketing for your property.

Consider selling your own home: Going solo as your own agent, or doing a "For Sale By Owner" (FSBO), can be a way to dodge those commission fees and hold onto more of the cash from selling your home. But, let's be honest, it's no stroll in the park. FSBO means you'll be putting in a lot of serious work.