It’s very important to know what the closing costs are when selling a house. Once you identify your closing costs you can then calculate your potential profit from the sale.
Pay-Off Existing Mortgage(s)
This will be the biggest expense for most people. You can get an idea of this closing cost from looking at your latest statement from your mortgage company, or by calling and asking for the information. As you make additional payments while your home is on the market, this number will continue to go down.
Transfer Tax
Cleverly disguised in North Carolina as “revenue stamps” this is basically the sales tax, paid by the seller, for selling the home. You can calculate the amount of this closing cost by dividing the sale price by 500. For example, $100,000/500 = $200. The transfer tax on a $100,000 sale would be $200.
Unpaid Property Taxes
The way taxes are handled can vary depending on the time of year and whether or not the tax bill has been paid. Basically, you are responsible for the portion of property taxes for the period you owned the home.
Sometimes the closing attorney will collect the proper amounts from both the seller and the buyer and pay the tax bill directly, if it is available. Tax bills are published at the end of July in Wake County.
If you sell before the bill is available, the attorney will do his best to estimate the amount of the bill and collect the prorated amount from the seller and credit the buyer. The buyer would then be responsible for paying the entire year’s tax bill. If the amount collected ends up being incorrect, once the actual bill is available in July, the buyer and seller can settle the difference after closing.
If your mortgage company collects a monthly escrow amount for taxes, the balance in the account will be refunded after closing.
HOA Dues
HOA dues are prorated as well. You are responsible for the portion for the period you owned the house. If you pay on an annual basis, there could be an amount collected from the buyer and credited to you for the unused portion.
Attorney Fees
This is typically a charge for the preparation of seller documents, including the deed. Most attorneys can get this done for about $125. You can always have your college buddy, or friend of the family, who happens to be an attorney, prepare these documents for you at a discounted price, but it is not recommended. You definitely don’t want to have closing delayed because there was some miscommunication between the two attorneys.
Realtor Compensation
This is typically a percentage of the sell price and is negotiable between seller and agent. From this amount, your Realtor will pay for all marketing and promotion expenses up front. If your house does not sell, or you change your mind about selling, the risk of loss of marketing expenses is typically on the agent. Or at least that’s how I work. Also, keep in mind that your listing agent will pay the buyer agent on the other side of the transaction from this amount.
Concessions For The Buyer
At the time of offer negotiations, there could be some concessions that the seller promises the buyer. Typical concession items are a home warranty or buyer closing costs paid by the seller.
Getting your home sold in today’s challenging market takes getting the list price right and doing a good job of preparation. With the need for a competitive price from the start, and the possible expense involved with preparing your home for sale, it is more important than ever to get a clear understanding of the costs of closing on your home. And keep in mind that most closing costs are paid from the net proceeds at the time of settlement.
I hope that helps you understand the usual closing costs involved with selling a home. If you would like to discuss your situation, and receive an estimate of the probable selling price of your home along with an estimate of your specific closing costs, just give me a call or email me.
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