Know the lingo of unexpected home-selling fees
A whole glossary’s worth of terms and fees — many of which you’re not likely to expect — add to the unfamiliarity and complexity of the home-selling process. You’ll feel better prepared if you are aware of from the outset of unexpected fees and what they really mean.
Fees You’ll Probably Have to Pay
- Transfer Tax: These taxes — only applicable in certain states — are imposed on the transfer of property titles.
- Property taxes: Depending on the closing date, you may have to pay off property taxes. Sellers are only responsible for paying property taxes when they owned the home.
- Mortgage balance: Before the sale goes though, you’ll have to pay off the remainder of the mortgage. This all happens simultaneously during what’s called a pay-off. The title company will order a payoff from the mortgage company.
- Title and escrow fees: The fee paid to the title company, escrow company or attorney for orchestrating the closing. An escrow is a third party that holds money until the transaction is complete.
Fees You May Have to Pay
- Courier fees: You may need a courier to send a loan payoff to a lender.
- Broker’s fee: If your realtor works with a broker, you may have to pay a broker’s fee too.
- Estoppel letter: This is a legal document issued by a homeowner’s association (HOA) detailing any outstanding balances the homeowner has on the property. You can try asking the HOA to waive this fee.
- Recording fees: A recording fee is a fee a government agency charges to register a real estate sale and make it a matter of public record.
- Mobile notary: After the lender has delivered the full and complete paperwork, a mobile notary may have to verify that all the documents have been signed by the appropriate parties. This usually costs $100 to $200 according to Walsh.
- Title insurance: Title insurance verifies that the home is yours to sell. In some states, buyers pay title insurance costs. In others, sellers pay it. If you purchased a home within the last three to five years, there’s a chance you’ll receive a break on the cost of title insurance if you request a “reissue rate” — which is essentially a discount. Consult with an attorney to help determine your eligibility.
- Lawyer consultation fee: Some states — like New York — require an attorney during home selling.
How much are closing costs?
Closing costs for buyers vary considerably by state, but typically land within 2% and 5% of the total value of the home. On a $250,000 home, for example, this translates to roughly between $5,000 and $12,500. However, closing costs for sellers may end up being as high as 10% in total.
A large portion of this fee will no doubt be the sales commission you pay your real estate agent — which, it’s important to note, is not set in stone. You can try to negotiate a lower rate at your listing appointment, which ultimately could save you thousands of dollars. The best way to see if a realtor will lower his or her commission fee? Simply ask, suggests Realtor.com. If cost is an issue, interview a few realtors to see what percentage they quote you so you can get a good idea of what’s a fair and reasonable commission.
Before you ask, however, keep in mind your realtor will likely be splitting his or her commission with the buyer’s agent as well as a brokerage house. They also may be paying out of pocket for costs associated with marketing — professional pictures, advertisements, flyers or open house refreshments.
The dance, for you as the seller, is about achieving a balance that both secures the best possible rate for yourself while still holding out the promise of a commission large enough to entice an experienced, savvy realtor.