How much does it really cost to sell your house?

How Much Are Closing Costs for Sellers?

When you sell a house, you can make a profit and use that cash to fund another home purchase, make an investment, and more. But your home's total sale price isn't the same as what you'll receive in your bank account when the deal closes.

That's because of closing costs: extra ancillary fees, property tax, transfer tax, escrow fee and any other payments required to close a real estate deal. When a home buyer purchases a house or any real estate, they don't just pay the asking price. In addition to items like homeowners insurance and the mortgage interest rate, they also pay a portion of the closing costs to cover state transfer tax requirements, legal fees, and so on.

However, the seller in a real estate deal must also pay closing costs. In fact, sellers are on the hook for the majority of closing costs in most real estate deals. Estimates say that closing costs for sellers typically account for between 8% and 10% of a home's sale price.

In most real estate deals, the cost of these fees comes directly out of the profits the home seller receives. Because of the closing cost, home sellers need to be aware of how much they'll pay before the deal is finalized so they aren't surprised when they take home a little less cash than they expected.

For example, the average home value of real estate in Cambridge is $945,550 . If a seller is required to pay 10% of the sale price to cover the closing cost, the average closing costs will equal about $94,500, give or take.

Before a closing, your agent and attorney will provide you with a Closing Disclosure, that outlines the exact closing costs for sellers required to pay.

Let's take a closer look at the specific closing costs you might need to keep in mind as the seller in a real estate deal.

Agent Commissions

If you use a real estate agent to locate a buyer and facilitate the home selling process, they'll charge a commission for their services. The realtor commission can vary heavily from person-to-person, but real estate commission fees usually total between 4% and 6% of the sale price.

Note, however, that the realtor commission price is negotiable between you and your listing agent. On top of the commission for your real estate agent, you may also have to pay the commission fee for your home's buyer's real estate agent as well.

Title Insurance Fees

The title insurance protects a new property owner from any issues with the home's original title (i.e. a dispute over who owns the property, outstanding liens from creditors or contractors, and so on). The title insurance fee is a one-time payment for a title search that usually ranges between $1000 and $4000 by a title company. This is separate from any mortgage insurance fees that must be negotiated.

Property Taxes

Whenever you own property, you also pay expenses that include property tax . The property tax rate can vary from year to year, but it's about $14.91 for every $1000 in assessed property value on average in Massachusetts.

When you sell your house, closing costs for sellers include prorated property tax up to the final date of the sale.

"Stamp" Taxes

Then there are so-called "stamp" taxes, which are also called real estate transfer taxes. The exact value of these transfer taxes can vary from state to state, and the name refers to the adhesive stamps used on real estate transfer documents to show that transfer tax has been paid on the property.

Stamp taxes are mandatory in Massachusetts and cost, on average, $4.56 per $1000 of the sale price. If you were to sell a home worth $500,000, the closing cost of the transfer tax would be around $2200.

Closing/Escrow Fees

Of course, home sellers must also pay any escrow fee or closing fee that may apply. If you use escrow to hold cash, the provider will charge a flat escrow fee between $500 in $2000 on average depending on where you live. They may also charge about 1% of the total sale price for your home. This escrow account may contain appraisal fees, underwriting fees, notary fees, loan origination fees and potential third-party fees.

Fortunately, most escrow fees are split between the seller and buyer and are highly negotiable. Depending on your contract, the buyer may be on the hook for these fees instead.

HOA Fees

If the home in question is part of a homeowner's association, you already pay periodic fees (yearly, quarterly, or monthly). When you sell your home, you'll need to make sure that you pay these fees up to the closing date - depending on when that is, you may need to add those fees to your total seller closing costs that come out of your home sale price.

On top of that, some homeowner's associations may charge transfer fees for you to transfer your property to a new owner. But this fee, like many others, may also be directed toward the buyer instead.

Attorney's Fees

Naturally, if a real estate attorney is involved with your real estate deal, you'll need to pay any fees associated with their services, like a recording fee. In Massachusetts, attorneys are required to oversee the closing process (whenever a home is bought or sold in the state regardless of the price). Attorney fees for this service, including a recording fee, can range from hundreds of dollars to thousands of dollars and should be calculated as part of your seller closing costs.

Any Repair Costs

Lastly, if your home requires any upkeep or maintenance repairs per the request of the buyer or because of results from inspections, you'll have to pay for those on top of the other seller closing costs above.

Does the Buyer Pay Closing Costs?

Yes! In a typical real estate deal, buyers will pay between 2% and 5% of the purchase price. Be sure to budget for buyer closing costs on top of your down payment. Most of this money goes toward application fees, origination fees, lender fees or real estate agent commissions.

However, every real estate deal is highly negotiable. Depending on the specifics of your deal, you could get the buyer in the deal to pay for more of your closing costs in exchange for seller concession agreements like:

Selling the home quickly so they can transfer ownership without having to pay two mortgages

Paying some of the home's upfront repair costs discovered during a home inspection

Knocking off a certain amount of the home's purchase price

Some of your closing costs must be paid upfront, and some can be rolled into a borrower's loan amount and purchase price by their mortgage lender. Your real estate agent may be able to assist when negotiating the closing costs with a potential buyer for your house.

Wrap Up

Understanding and anticipating the average closing costs you may be expected to pay for during the real estate transaction is vital so you aren't taken by surprise. Plus, when you fully grasp the closing costs you need to pay, you'll be able to calculate your true profits.

An additional resource that may be helpful is the SmartAsset Closing Costs Calculator , which can help you estimate your closing costs.

If you need more information about the selling process, or want to get in touch with a knowledgeable real estate agent for the Cambridge area, Cambridge Sage is here to help. Contact us today for more information.