The Cost of Selling a Home

My first home, Levittown NY.  $14,000 home in the late 1950's, this home  is worth nearly $375,000 today.

My first home, Levittown NY. $14,000 in the late 1950’s, this home is worth nearly $375,000 today.

Before becoming a Realtor® my family and I bought and sold quite a few homes. And despite the experience I gained with each purchase, I was never prepared for the cost involved, particularly in selling a home. What I know now that I didn’t know then, is that it takes a really great real estate agent and a patient title officer to lay the groundwork for a transaction with few financial surprises. The Consumer Finance Protection Bureau is attempting address the confusion inherent in the costs related to mortgage lending and home purchases. However, on the selling side, things can be equally confusing. While amounts vary by  transaction, title company, and agreements between real estate agent and seller, here are some common costs associated with the sale of a home after the mortgage balance and any interest have been paid off, along with liens, assessments or prepayment penalties:

Real estate agent commissions: the seller typically pays a percentage of the home’s purchase price and is responsible for both the seller and buyer agent commissions. The percentage or flat fee, in some cases, is agreed upon between the listing agent and the seller prior to the home going on the market.

Prorated Taxes: In Arizona, taxes are paid “in arrears”. What that means is that the taxes for the first six months of this year won’t be due until October 1. The second half of the tax bill will be due in March of next year. So if the buyers of your home get the keys on June 1st, they will receive a bill in October to cover the first 181 days of the year, yet they will only have owned the home for 30 of those days. That’s why when you look at your closing statement, you will see a charge for prorated taxes that reimburses the buyers for the tax fees covering the portion of those first 6 months in which you owned the home. As of this writing, the median annual property tax in Arizona is $1418.00 for a home worth the median value of $238,000. So if we apply this tax rate to our example above, the sellers of that home will pay $585.88 at closing to reimburse the buyers for the January – May taxes.

Seller Paid Title Policy: The seller pays for title insurance that ensures that the title to the home is passed free and clear to the buyers. The fee covers the title search and resolution of any issues that may have been uncovered in that search. The fee for that runs anywhere between $1000.00 and $1500.00. If the buyer is taking a loan to purchase the home, he or she is paying a similar fee to the title company to ensure the lender that the title is free and clear.

HOA Seller Disclosure Fee: If the home you’re selling is in a homeowner association, as many in Maricopa County are, you can anticipate various fees that the HOA charges related to the sale of the property. In most cases, who pays which fees is part of the negotiation. Except when it comes to the resale disclosure fee. That is almost always the a seller fee and as such it is preprinted in the HOA addendum required to be submitted with the purchase contract. The seller disclosure fee can run as high as $400.00.  Other fees such as HOA transfer fees, capital improvement fees, or other assessments can be negotiated between buyer and seller.

Escrow, Settlement or Title fee: This is the fee that is charged by the title company for doing it’s job. The $500 – $600 seller paid fee is half of the total escrow fee, with the buyer paying his half, unless it’s a VA loan in which case the seller pays both halves.

Recording Fee: Typically a $40 fee paid for recording the deed transfer with the county.

Re-conveyance Tracking Fee:  Paid to the title company to insure that the trustee prepares reconveyances in a timely manner and files them with the County Recorder. This fee can go up to $200 and is sometimes combined with courier or other fees.

The list above are standard fees that can be found on any seller closing statement. Additional fees that you might see based on what has been negotiated would be:

Seller Concessions: Either a dollar amount or a percentage of the purchase price to goes toward buyer closing costs.

Home Warranty: Typically between $300 and $750, this is an insurance plan that either the buyer or seller can pay for to cover repairs to appliances and other home systems for the first year of the buyers ownership.

Septic Inspection: If a home is on a septic system vs. a public sewer, Arizona requires that seller pay for a septic inspection within 6 months prior to and no later than 3 days prior to close of escrow. This is a fee that is often paid by the seller outside of escrow.

HOA Transfer and/or other fees: As discussed above in HOA Seller Resale Discloser fees.

It’s true that the largest line item that a seller pays in closing costs is the real estate agent commissions. In another blog post, I’ll be describing what agents do for those commissions…or at least what THIS agents does!