Real Estate

How Much Are Closing Costs for the Seller in a Real Estate Transaction

Man and woman going over real estate contract

It’s not uncommon for a seller to have to pay closing costs. These are the additional fees that are paid at the time the home is sold, such as fees related to taxes and prepayments. Though the home buyer pays his or her own closing costs, often related to the mortgage they are obtaining to buy the home, sellers need to know their responsibilities. Closing costs vary, though. It’s rare that there are no fees involved in the sale.

What Type of Selling Costs Occur When a Home Is Sold?

Closing costs is a term used to describe any type of fee paid at the time a home is sold. These costs often include a wide range of fees associated with the transaction. Both the buyer and seller may end up paying for some of those costs.

Buyer Closing Costs

Buyers can expect to pay between 2 and 5 percent of the total purchase price of their home in these costs. Most of these fees relate to the mortgage they obtain, though they may also include costs associated with the home itself.

Seller Closing Costs

Closing costs for sellers tend to be significantly higher, as much as 10 percent in some cases. Each transaction differs, but it is not uncommon for sellers to pay a significantly higher amount in closing costs due to real estate agent fees. In most transactions, the seller pays the real estate agent’s commission – both the buying and the selling agents’ fees. That can make up as much as 6 percent of those closing costs on their own. In addition to this, sellers also end up paying taxes and other fees associated with the sale.

What Makes Up the Seller’s Closing Fees?

For sellers, hearing that a large amount of the money you obtain from the sale of your home is going towards fees can be frustrating. However, it must be factored into the purchase price you list your home at. This can be difficult in some situations. You want to sell your home for what it’s worth at least enough to have a clear break with your current loan balance. At the same time, you also need to make sure the home sells fast enough. It can be frustrating.

Take a look at the key components that make up the most common seller’s closing costs. You will find that this can amount to thousands of dollars on the sale of the home.

Agent Commission

The largest chunk of seller closing costs goes to pay the real estate agents involved in the transaction. This includes your agent, who lists your home, markets it, and handles all offers for you. It also includes the buyer’s agent. The buyers don’t pay their real estate agent directly. Rather, it is factored into the sale price of the home. For that reason, it should be something you factor into the selling price of your home.

It’s not uncommon for sellers to pay up to 6 percent in commission. That is generally divided in half. Some agents do charge less. However, this should be stated upfront if that’s the case. It is possible to ask your agent for a reduced commission, but a full-service real estate agent isn’t likely to offer such. However, if your agent is working to help you to sell your current home and buy a new home, it may be possible to get a discount off this price.

It is possible to sell your home on your own – FSBO – to eliminate some of those costs to you. However, if the buyer’s who come to you have a real estate agent (which is very common), you still have to pay out-of-pocket for these costs as well. You may be able to negotiate that into the contract to purchase the home, though.

Title Insurance

Title insurance helps the new owner to have some protection over the home’s ownership. For example, there may be a creditor or a contractor – even a government entity or an heir – that steps forward with a claim on the ownership of the home. Title insurance helps cover that cost if such a claim were to occur.

Buyers often encourage the seller to cover the title insurance purchase. This can be as little as $1,000 or as much as $5,000. Keep in mind that on the closing paperwork, you will also likely see the sellers paying title insurance as well. This is a requirement their lender puts on them, and it protects just the lender.


Taxes vary significantly from one area to the next. However, it will be the responsibility of the seller to pay all taxes related to the home up to the point of it changing hands. One key tax you need to pay is the seller’s transfer tax. It is also called a title fee. This tax is set by the state’s laws. It can range from $50 in some states up to $8,000 in others.

Prorated property taxes are another form of tax that most sellers need to pay at the time of closing on the home. These are the property taxes you are paying now, based on the number of days you have lived in the home. The property tax rate differs from one community to the next. However, nearly all states require owners to pay property taxes every six months. You may already be paying them in your mortgage payment. In all cases, sellers are responsible for taxes up to the date of the sale.

Escrow-related Fees

Most of the time, sellers also need to pay escrow fees. An escrow account is generally set up once there is a bid accepted by the home’s seller. It is a financial account that is managed by a third party, a lender that is not within the specific transaction. It helps to hold money being passed between the buyer and the seller during the closing process. This is where the money is held until the actual transaction goes through, and everything is in good order.

Escrow accounts are a critical component of the home’s sale. However, there are fees to establish it and maintain it. And, as you may have expected, the seller has to pay those. Most of the time, they are a flat fee. They can range from $500 up to several thousand, usually depending on the size of the purchase. In other cases, they can represent a specific percentage of the home’s sale price. Many times, it is possible for the buyer and the seller to split the escrow fees evenly. Be sure to ask about this if you are not seeing it listed as such on your closing documents.

Homeowners Association Fees

If you live within an HOA, you may have to haggle about your annual dues and any other fees you owe to the agency. You will likely need to pay these up to the date of the sale of the property. It works much like property taxes in terms of the way it is divided between the seller and the buyer. Also, be aware of any fees associated with the home’s change of ownership that the HOA charges. Some have transfer fees that sellers have to pay.

Legal Fees

Even if you try to sell your home for sale by owner, there are likely to be some attorney fees or legal transaction fees involved in the sale. These can include costs for transferring the title and creating the contract. Some of these costs will fall into the brokerage’s fees (which are a part of the seller’s commissions). Other times, they are a set fee that you have to pay at the time of closing.

There are some situations in which the buyers will pay the closing fees related to the legal aspects of the case. However, if there are any judgments or liens on the property, that needs to be communicated as a part of the sale’s contract. It is likely that the sellers have to pay these fees first.

A Few More Fees?

It’s important to examine all seller’s fees and closing costs thoroughly. Feel free to question anything that you don’t recognize. There are other fees you may have to pay, though. Here are some examples.

  • Inspection fees; especially if there is a safety hazard that becomes evident during the inspection
  • Fees related to pest management, especially termites. Some buyers will not agree to move on with the sale until you do this.
  • Mold remediation fees may also be necessary he in some situations pending the terms of the sales contract.
  • Home warranty premiums can sometimes apply to the home’s seller as well.
  • There may also be charges to you for any repairs that you elect to allow the new homeowners to make after they move in – at a discounted price on the sale’s contract.

Closing costs for the seller can be high. And, they can be a very difficult fee to avoid especially if you are selling your home through a real estate agent. Still, it’s essential to be educated about every line item that you have listed.


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