Seller Closing Costs: Additional Fees You May Need to Pay

16 02 2011

Real estate transactions are subject to several taxes and fees at the time the deal is finalized, or closed. These are called closing costs. These taxes and fees vary widely based on the city, state, and county where the property is located. Though usually less expensive for sellers than buyers, closing costs are often thousands of dollars. It’s important to understand the different fees that are paid by the buyer and the seller. This article focuses on the costs that sellers of property can expect to have deducted from their proceeds when the sale closes.
Here are three costs that the seller, as opposed to the buyer, is most often obligated to pay.  Local real estate laws and rules, as well as pre-negotiated terms between the seller and buyer may also determine who is responsible for these costs:

1. Real estate commission, or the fee negotiated with the seller’s real estate broker—this is a percentage of the sales price and it is paid to the real estate agent. It is one of the biggest costs paid by the seller and it is paid in the form of a deduction from the sales proceeds.

2. Title/lien search, a process to ensure that the seller has the right to sell a property—this search also determines whether there are any restrictions or allowances attached to the land (such as an easement for power lines), or any liens on the property. Examples include second or third mortgages, back taxes, and construction liens.

3. If the title search turns up any liens on the property, the seller often needs to pay these liens to ensure a clear title for the buyer.

The following charges that may be owed by the seller, the buyer, or both, depending on the terms negotiated beforehand and local laws:

1. Document stamps (also called doc stamps) on the deed—this is a state tax assessed for the sale of the property. It is due at the time the deed is transferred into the name of the buyer. For example, if your state’s tax assessment is $0.60 per $100 of a sales price, the doc stamps on the deed of a $200,000 property would cost $1200.

2. Document recording fees—most counties require a per-page document-recording fee for deeds. The new deed being recorded for the mortgage is conventionally charged to the buyer. However, there is a deed that transfers title out of the seller’s name, and this is typically a seller cost.

3. Preparation of sale documents—these include the deed, bill of sale, no-lien affidavit, and 1099-tax form. In some areas these documents are prepared by an attorney, while in other cases, the title company takes care of this process. Either way, there is generally an escrow fee assessed when handled by a title company. Paperwork prepared on behalf of the seller is charged to the seller.

4. Prorated homeowner-association fees and property taxes—the seller will need to pay the portion calculated for the percentage of the year that they owned the home.

Since costs associated with closing the sale of a home are often vastly different from state to state and even city to city, it is important to consult with a real-estate professional about the closing costs in your area. Your real estate agent will discuss all possible fees and explain any local regulations that apply to your situation.

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