The goal of every home seller is to be able to make money off the sale of their home. When you receive an offer, it can be exciting to think about what kind of profit you will make off of it. But before you start laughing your way to the bank, you are going to have to pay closing costs. Unfortunately, sellers are typically responsible for the majority of the fees. While you probably aren’t going to walk away without paying any closing costs, there are ways that you can reduce the amount that you pay.
What are closing costs?
There are a lot of fees that are involved with a real estate transaction. These fees together are “closing costs.” There is no way to predict the exact cost of the fees because they are different from one state to another, and can even vary from one city to another. The fees that you are responsible for as the seller will be deducted from the amount the buyer is paying you.
The fees include things like:
Commission for real estate agents – The normal commission is 6 percent, which is split between the buyer’s agent and your agent.
Transfer tax – This fee is for local and state governments to transfer the title from the seller to the buyer. There is a larger range in this fee. It can be as high as 2 percent or as low as 0.1 percent.
Attorney fees – There are not attorneys involved in every real estate transaction. Some states require both the buyer and seller to use attorneys.
Title insurance – This fee typically belongs to the buyer and it protects them in case there is a problem with the title that is discovered down the road.
Taxes and HOA fees – These fees are usually prorated and need to be settled once the house is being sold.
Split the costs
In a typical real estate transaction, the buyer is responsible for paying the majority of the line item fees. However, the seller is responsible for the commission. Since the commission is usually the largest fee, the seller will still pay more than the buyer does. You can try to negotiate with the buyer on the closing costs. If you are in a buyer’s market, you should avoid using this tactic; however, you may be able to get away with it in a seller’s market.
The buyer can simply increase their offer, which will provide you with the additional funds needed to pay your portion of the closing costs. By doing this, the buyer doesn’t need to come up with additional funds out of their pocket, they can simply roll it into their mortgage.
While 6 percent is the standard commission, it can be negotiated. Talk to your real estate agent to ask if they are willing to take a smaller cut. Sometimes this is necessary if you are trying to walk away from your house without owing additional money.
Most of us living in America are not comfortable with negotiating on prices. We are used to paying what is asked of us. Real estate transactions are a time when you should look for ways to negotiate. Don’t forget to shop around for prices and the items you have control over.