The offer price and the figure a home seller receives at closing are not the same thing. Real estate agent's commission, title insurance, recording fees, escrow fees, transfer taxes and notary charges, not to mention countless other closing costs, can eat away up to 10 percent of your home's sale price, depending on which of these costs you agree to pay. The most accurate way to calculate sale costs is to itemize everything. Ask your real estate agent for a rough idea of your closing costs when you hire her to list your home for sale.
At closing you pay off the balance of your home loan, second and subsequent mortgages, liens and any home equity lines of credit. Read the conditions of your loan, as some lenders charge a penalty for paying off your mortgage loan early. You might also face a processing fee to pay off your loan. The loan payoff figure changes daily, and you won't know the final amount until closing. You can, however, ask your lender for a payoff statement, which gives you a fair idea of the final figures.
The seller invariably pays his real estate agent's commission, and that of the buyer's agent, at closing. These charges should be transparent in the listing contract. Expect to pay around 4 or 5 percent of the sale price, split between the two agents. Many real estate agents reduce their commission if they represent the buyer in the same transaction.
Fixed closing costs can include, but are not limited to, a title search fee, escrow fee, home warranty, housing association transfer fee, recording fee, courier fee, transfer tax and notary fee. There may be greater or fewer closing costs depending on the law and convention in your state. Generally, the buyer pays more line items than the seller. However, all fees and charges are negotiable, and you might agree to pay some or all of the buyer's closing costs or inspection fees as part of the contract. Once you accept an offer, your real estate agent can talk you through the items you are responsible for.
If the buyer's home inspection throws up material problems with the property, you likely will pay for the repairs. This is not a cost you can estimate upfront. One alternative is to pay for a home inspection and carry out any identified repairs before you list. A home inspection costs, on average, between $375 and $550. As to the repairs, get at least three estimates before you hire a contractor, and keep the invoices so you can add the cost to your other costs of sale.
Packing up and shipping out costs money, and that money is a sale cost. In addition to the moving company's fee, factor in the cost of packing materials, any specialist insurance you take out to protect your valuables while in transit, and self-storage rental costs if you put your possessions in storage. Some utility companies ask you to pay off your account balance before removing your name from the account.
Many home sellers upgrade their homes to achieve a higher sale price. For example, you may give your home a fresh coat of paint, fit new carpets or employ a professional home stager. These extras raise the upfront cost of selling your home. However, the jury is out as to whether these expenses are genuine costs. A 2007 report by the National Association of Exclusive Buyer Agents, for example, showed that staged homes fetched higher sale prices than un-staged homes. For the most part, this optional money is not a cost but an investment in your home.