Whether you're a buyer or seller, it's crucial that you have a good understanding of your closing costs when entering into a purchase agreement. Real estate deals involve many different professionals and property fees. On average, buyers can expect to pay 2-6% of the home's purchase price while sellers typically pay 8-10% of the sale price. Seller fees are often higher because of Realtor commissions.
Seller's closing costs are deducted from the proceeds at the time of closing. Sellers generally aren't required to bring any money to closing unless their home equity isn't enough to cover all of the costs. Buyers will either bring their funds to closing with a certified check or wire them to the title company ahead of time.
seller closing costs
commissions
Sellers in our market traditionally pay a commission to their listing agent who then splits that fee with the buyer's agent. This commission model is called a co-broke and will be outlined in your listing agreement. When offering a co-broke, real estate commissions amount to an average of 5-7% of the purchase price.
title fees
It is customary in many areas for the seller to pay for title insurance. Occasionally, this cost is split between the buyer and seller. Title insurance policies protect the buyer from unforeseen ownership disputes and insure the lender as the first lien holder until the mortgage is paid in full. You will also owe fees to the title company for the title examination, deed preparation, and settling the closing,
taxes + hoa fees
There are two different methods for calculating tax prorations depending on your county's customs: lien method and due payable. Our taxes are paid in arrears, meaning a homeowner has already benefited from their property taxes at the time they are due. Due and payable taxes prorate the seller's portion of the tax bill to the day of closing. For lien method taxes, the seller will provide the buyer with a credit for the upcoming tax bill as well as a portion of the following bill.
recording fees + transfer taxes
Sellers will pay county transfer taxes and recording fees.
seller paid concessions
If you agreed to cover a portion of the buyer's closing costs or prepaids, this will be listed as a debit on your settlement statement.
buyer closing costs
buyer broker commission
If you have an Exclusive Buyer Agreement in place, you may be responsible for paying your Realtor. This is a document you will sign with your agent before going under contract and they will make you aware of any costs owed as you enter a purchase agreement.
lending fees
As the buyer, you will be responsible for all loan charges. This will include the fees for services your lender provided, the appraisal (if not paid upfront), credit report fees, and interest points if any were purchased.
homeowner's insurance + escrows
If you're obtaining a mortgage, your lender will require you to have insurance on the property by the time of closing. The annual premium is often included with your closing costs. If you're escrowing taxes and insurance, your lender may also require a couple of months worth of homeowner's insurance property tax payments for the escrow account.
title charges
These charges can vary as lenders and title companies have different requirements. Common title fees debited from the buyer are the title abstract, survey, mechanic lien coverage, settlement, owner's title insurance, recording and wire fees.
how much can sellers contribute to a buyer's closing costs?
Keep in mind that seller paid concessions must be negotiated. Buyers are solely responsible for their own closing costs unless stated otherwise in the purchase agreement or subsequent addendums. In especially hot markets, it will be more difficult to get a seller to agree to pay your closing costs.
How much sellers can contribute is dependent on the buyer's loan type. Buyers can receive 6% of the purchase price if they're obtaining an FHA or USDA loan. For VA loans, the limit is 4% of the purchase price. With conventional loans, the amount is capped based on the buyer's down payment.
- Down payments less than 10% can receive no more than 3% of seller contributions
- 10-25% down payments can receive up to 6%
- Down payments above 25% can receive up to 9%
- If you're purchasing an investment property, the limit is 2% no matter the down payment amount
Seller paid closing costs can only go toward closing costs and prepaids. If the seller agrees to pay 5% of the purchase price but your closing costs only amount to 4%, your closing costs will be covered but you will not receive a credit for the additional 1%.