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Who Pays the Closing Costs in a Home Sale?

Posted on Tuesday, September 26, 2017
You are selling your home, but who pays for the costs of the sale?

As you plan to buy or sell a home, you prepare. If you are the seller, you complete renovations, and you stage your home for buyers. If you are the buyer, you start to compile lists of neighborhoods, housing styles, and even specific homes that intrigue you. Some of these activities involve costs, but as you move closer to the home sale, there are other costs involved in the sale as well. What are these costs, and do you need to pay them?

What Costs Do You Pay If You Are the Seller?

If you have a home for sale, what costs do you need to pay? While sellers often have a shorter list of items to pay than buyers, those costs can be more expensive overall.

  • The seller pays for the realtors' fees for both the seller and the buyer. Since this cost can be up to 6 percent of the total price of the home, it can be a fairly large cost to the seller.
  • Sellers also pay for some of the costs for items that reassure the buyer. For example, the seller will pay for the title insurance premiums to protect the new homeowners in case there are title issues in the future. The seller may also offer a home warranty to give the buyers reassurance that the first year will go well.
  • Sellers pay transfer taxes and recording fees that they owe to county or local governments to transfer the property's title.
  • They also need to pay the buyers prorated fees for taxes and homeowners association dues.

In addition to the usual costs for the seller, the buyer may ask the seller to pay some additional costs. These will be negotiated at the time of the sale, and they will be part of the overall offer that the buyer makes to the seller. This can reduce the amount of cash that the buyer needs to have on hand during the sale, so it is different than asking the seller to reduce the purchase price.

If you are buying a home, you will often pay a lower percentage of fees than the seller.

What Costs Do You Pay if You Are the Buyer?

As the buyer, you need to watch your costs, particularly if you are a first-time buyer and you do not have a large contingency fund for extras. Closing costs for homebuyers can range from 2 percent to 5 percent of the sale price of the home.

The buyer needs to pay for many different costs, including:

  • Fees for attorneys.
  • Financial fees. For example, you may need to pay for a credit check and for loan origination fees from the lender. Underwriting fees finance the cost of evaluating your loan.
  • Inspection fees for the home inspection, so that you ensure that you are making an informed choice about the state of the home. You will also need to do a title search for unpaid liens.
  • Appraisal fees to ensure that the cost of the home is fair, and survey fees to look at the size of the land.
  • Lender's title insurance to protect the lender.
  • An escrow deposit to show that you have enough money to pay taxes and insurance.
  • Luxury taxes, depending on the cost of the home and the state where you live.

At Open for Homes, we are here to support you as you make decisions about buying or selling your home. Take a look at the blog at Open For Homes to get more information as you navigate the details of your home sale.

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