March 14, 2022

Closing Costs

How Much Are Closing Costs For Sellers?

Seller closing costs are a combination of taxes, fees, prepayments, and services that vary depending on your location. Closing costs can differ due to variations in local tax laws, lender costs, and title and settlement company fees. In some cities, you might pay thousands just to transfer the title of the home to the new owner, while in other areas it’s free. It’s important to understand your regional burden, as well as who usually pays closing costs in the transaction and when they’re due.

 

Who pays closing costs — the buyer or the seller?

Both buyers and sellers pay closing costs, but as a seller, you can expect to pay more.

 

Seller closing costs: Closing costs for sellers can reach 8% to 10% of the sale price of the home. It’s higher than the buyer’s closing costs because the seller typically pays the listing agent’s commission — around 6% of the sale in total split 3% to the listing agent and 3% to the buyer's agent. Fees and taxes for the seller are an additional 2% to 4% of the sale. However, seller closing costs are deducted from the proceeds of the sale of the home at closing, so you rarely need to bring cash to closing.

 

Buyer closing costs: As a buyer, you can expect to pay 2% to 5% of the purchase price in closing costs, most of which go to lender-related fees at closing. See more on buyer closing costs below.

 

According to research, about 60% of sellers are first-time sellers, and the closing process can be confusing. Read on below to learn more about seller closing costs.

 

Closing costs for sellers

The average closing costs for a seller total roughly 8% to 10% of the sale price of the home, or about $20,000-$25,000, based on the median U.S. home value of $245,000 as of December 2019.

Seller closing costs are made up of several expenses. Here’s a quick breakdown of potential costs and fees:

  • Agent commission
  • Transfer tax
  • Title insurance
  • Escrow and closing fees
  • Prorated property taxes
  • HOA fees
  • Credits toward closing costs
  • Attorney’s fees
  • Real estate agent commission

 

Transfer tax

What is a transfer tax? Also known as a government transfer tax or title fee, these are the taxes you’ll pay when the title for the home passes from you to your buyer at the time of closing.

This tax is charged by the state you live in, and the cost varies a lot by state — one of the reasons it’s so hard to find a simple, accurate estimate of closing costs. To illustrate how widely this amount varies, let’s take a look at the top 10 real estate markets. (Note: These figures are based on 6% agent commission of the median home value for each area.)

Metro area Transfer tax amount, based on median-valued home

San Jose, CA         $1,085

San Francisco, CA  $928

Los Angeles, CA     $662

Seattle, WA           $8,654

San Diego, CA        $585

Washington, DC      $4,212

Boston, MA             $1,932

New York, NY         $1,725

Sacramento, CA      $397

Denver, CO             $36

 

Owner’s title insurance

Title insurance protects the new owner from issues with your home’s title — meaning, if there’s someone else who can claim ownership over the property, either because of a dispute over the property or because of outstanding liens from contractors, creditors, or the government.

This one-time payment protects the future owner from the financial burden of sorting out title issues in court, whether they arise at closing or years down the road. It even covers the money they’ve put into a home if they end up having to release their interest in the property (a worst-case scenario).

It’s typically a pro-rated amount ranging from $1,000 - $4,000 and is split between the home owner and buyer.

One important thing to note: On closing day, you’ll probably see two different title insurance line items on your closing documents. One is the owner’s title insurance mentioned above. The other is the lender’s title insurance. It’s a similar policy that protects the new buyer’s lender’s interest in the property, and it’s typically paid by the buyer.

 

Escrow and closing fees

Escrow providers charge either a flat fee (between $500 and $2,000, depending on where you live), or about 1% of the home sale price to manage the closing of the transaction, which includes the signing and recording of the closing documents and the deed, and the holding of all the purchase funds. There are usually some additional charges — think office expenses, fees for transferring funds, the copying of documents, and notary charges.

Escrow fees are usually split 50-50 between seller and buyer.  

 

Prorated property taxes

As you know, when you own a property, you pay property taxes. While the property tax rate can vary widely state to state, all 50 states have some form of property taxes.

Most states accept property tax payments twice a year, and you can either pay them directly or have them paid out of an escrow account associated with your mortgage. When you go to sell your house, you’ll be responsible for prorated property taxes due up to the date of the sale, at which point the buyer will take over. Depending on your timing, you may have to pay money at closing to bring yourself up to date.

 

HOA fees

If you’re living in a community that is subject to a homeowner’s association (HOA), you likely pay monthly, quarterly, or yearly dues. Just like with property taxes, you’ll have to make sure you’ve paid up to the close date, which can mean forking out some cash at closing. Some HOAs also charge a transfer fee to transfer your property to the new owner.

 

Credit towards closing costs

If you’re selling your home in a buyers market (where buyers have their pick of many listings), you may have sweetened the deal by offering your buyer a credit toward closing costs. This is also called a seller assist or seller concession. (This is not the case in a seller's market)

The credit you offer them goes to cover some of their closing costs, effectively lowering the amount of cash they need to close on their house. If this was part of your deal-making, expect to see it as a line item on your closing.

 

Attorney fees

In some states, you’re actually required by state law to have a real estate attorney present when a home is bought or sold. In the majority of the country, it’s not required, but people do choose to have an attorney help them with the transaction, especially if dealing with complex transactions, distressed properties, or real estate holdings that have been inherited. If you do hire a lawyer, he or she will often be paid at closing, out of the proceeds from the sale.

Attorneys are required to oversee closing in 21 states and Washington, D.C. These states include Alabama, Connecticut, Delaware, Florida, Georgia, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Dakota, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, and West Virginia. In these states, the closing attorney would generally take the place of an escrow company or other settlement agent. 

 

When are closing costs due?

Closing costs are due at the closing when the buyer’s funds are available for payment and disbursement and the closing documents are all signed around. All of the items we’ve covered above will be deducted from your proceeds on the sale, so you won’t need to bring cash to your closing unless your property is underwater — that means you owe more on it than it’s worth.

 

In 2018, the typical U.S. home spent between 65 and 93 days on the market, from listing to closing. The time a home spends on the market varies greatly depending on local market conditions, demand, and seasonality. Time tends to be shorter in the spring and summer months when home buying demand is highest, and longer in fall and winter when demand falls off. (In today's market, you can expect less than 60 days on the market.)

 

How to reduce closing costs

While you might want to know how to avoid closing costs completely, it can’t really be done. But there are a few ways to reduce closing costs, including:

Shopping around for title and escrow/settlement companies: In most states, title and escrow companies set their own price structure, so it’s worth shopping around to make sure you’re getting a good deal.

Requesting a title insurance reissue rate: As discussed earlier, if you’ve lived in the home you’re selling for just a few years, you may qualify for a reduced rate on your owner’s title insurance policy.

Selling FSBO (For Sale By Owner) or with a discount broker: Save some or all of the 3% commission that goes to the seller’s agent by listing on your own or using a limited-service broker.

 

Other seller costs

In addition to closing costs, keep in mind that as a seller, you may end up paying for additional costs, including:

 

Loan prepayment fee: Depending on the terms of the mortgage you’ll be paying off, you’ll want to watch out for a prepayment penalty. This one-time fee is paid at closing to your mortgage company.

Home improvements: Unless your home is picture-perfect to begin with, you’ll likely spend some money getting your home ready for listing. Common tasks include painting, servicing major systems like the furnace and A/C, and landscaping. While not part of your actual closing process, it’s an out-of-pocket expense you’ll want to plan for.

Moving costs: Of course, right around closing, you’ll also be moving. Make sure to set aside funds to cover your moving expenses, whether you’re moving across town or across the country.

 

Closing costs for buyers

Often, people sell their home because they’re buying a new home. If you’re buying another home soon, you’re not out from under-closing costs just yet. Buyers have their own set of closing costs when buying a new home, and they typically include:

 

  • Appraisal fee
  • Application fee
  • Origination fee
  • Title insurance policy for the lender
  • Inspection fee
  • Flood certification fee (in some areas)
  • Prepaid interest
  • Homeowner’s insurance
  • Pro-rated property taxes
  • Tax servicing fee
  • Credit report fee
  • Bank processing fee
  • Recording fee
  • Notary fee
  • Loan discount points

Feb. 26, 2022

5 Buyer Tips

Posted in Home Buying Tips
Feb. 23, 2022

What Is A CMA?

Why A CMA is so important

A CMA is the most important factor in establishing the "Right" price when listing your home on the market. Positioning your home to attract the most active buyers is the job of your skilled agent. The right price and marketing plan will ensure the best opportunity for a possible multiple offer situation.

Posted in Home Selling Tips
Feb. 17, 2022

Do you need to renovate?

Home Selling Tips For 2022

If you’re planning to sell this year, you’re probably thinking about what you’ll need to do to get your house ready to appeal to the most buyers. It’s crucial to work with a trusted real estate professional who knows your local market to get your home ready to sell. But there are a few things you should consider when deciding what to renovate and update before listing this season. Here are three things to keep top of mind as you’re making your list of projects to tackle this year.

Posted in Home Selling Tips
Feb. 10, 2022

Market Update January 2022

Market Update - January 2022

So far at the beginning of 2022, there has been very little change in the market from 2021. 

We simply have more buyers than we do sellers, do you remember the old saying "Supply & Demand"? Stay tuned each week for a new video regarding updates, home tours, buyer & seller tips!

Learn more about selling your home with us

I dare you to find another brokerage that offers the same exclusive marketing exposure and dominance as we do. I invite you to view our very "Cutting-Edge, Top-Of-The-Market, Second-To-None" Marketing tools & strategy offered to all of our exclusive listings.
Click Here

We Want To Hear What You Think?

Please leave a comment below, I look forward to answering your questions!

 

Posted in Market Update
Feb. 10, 2022

#1 Question Sellers Ask?

#1 Question that sellers ask

The most common question I get asked when speaking with potential sellers is "What are you going to do differently than other agents do?"

There are a number of different strategies and techniques that I practice daily, however, one of the most powerful differences that differentiate me from other agents is my marketing strategy. I go above and beyond the typical MLS listing syndication and create additional marketing campaign(s) that rank on the first page of Google. Attracting the highest level of buyers and driving them directly to our exclusive home listings.

Learn more about selling your home with us

I dare you to find another brokerage that offers the same exclusive marketing exposure and dominance as we do. I invite you to view our very "Cutting-Edge, Top-Of-The-Market, Second-To-None" Marketing tools & strategy offered to all of our exclusive listings.
Click Here

We Want To Hear What You Think?

Please leave a comment below, I look forward to answering your questions!

 

Posted in Home Selling Tips
April 27, 2021

Navigating Multiple Offers As A Seller

Make a game plan

Go through each offer with your agent and discuss your negotiation strategy. Will you inform all buyers that there are multiple offers and invite them to present their ‘best and final terms within a set time frame? This strategy allows you to compare all terms at once and make your decision. Or will you counter one offer before making a decision on the others?

There are a number of different strategies so be sure to consult your agent to make sure you are getting all of the details from each buyer and making the best decision for your own situation.

Think more than price

Sure, it’s tempting to accept the highest bid, but the highest-priced offer isn’t always the best offer. Remember that once an offer is accepted, there are many more steps to complete in order to successfully close the transaction.

Every seller has unique goals, so factors like finance contingencies and closing date may be as important as the offer price. In addition, you should take the appraisal of your home into consideration if you choose the highest-priced offer. Some buyers will bid above list price and possibly above market value just to “win”, but if the appraisal comes in at a price lower than the offer, the buyer may have no choice but to cancel the contract or ask you to reduce the purchase price.

Act quickly

Respond to offers in a timely manner, and once the terms are to your liking, be sure to sign the contract as soon as possible. The longer a negotiation drags on, the more tenuous it becomes as buyers may become suspicious or concerned and rescind their offers.

Maintain your goals

Multiple offers can be stressful for all parties in the transaction so it’s important to be clear-headed and stick to your objectives. For example, if you want a quick closing, keep that in mind when evaluating every bid that you’ve received. There are often elevated levels of emotion during the negotiation of multiple offers so try not to get caught up in those emotions.

Tread lightly

While you likely have the leverage in negotiations, you always want to keep a buyer engaged and avoid ultimatums. Buyers are generally more likely to walk away from a negotiation when they feel as though they’ve lost control or they suspect unethical behavior (whether it is happening or not – perception is reality).

While the goal is to get you the best possible price and terms for your home, not losing your buyer(s) and successfully closing should be just as important.

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April 27, 2021

Inventory Challenges

How Home Buyers Can Navigate Inventory Challenges

Whether you’re in the process of buying or selling a home or just keep up with real estate news, you’ve probably heard about the lack of inventory in housing markets throughout the country.

While fewer properties on the market mean increased competition for buyers, there are still ways for home shoppers to navigate inventory challenges and have an edge in the marketplace. Here are a few tips :

Tap into Pre-Market Opportunities

Pre-market (or private market) listings are homes that are for sale (i.e., there is a signed listing agreement), but are not yet publicly listed on the MLS. As a result, buyers won’t find these listings on major search portals like Zillow, Trulia, or Realtor.com, or national brokerage sites such as Redfin.

This could be for a variety of reasons. For example, a seller may want to do some prep work to get their home ready for sale or may be waiting for the spring market. In some cases, it’s the desire for more privacy.

Pre-market listings make up a growing segment of the market, and they are typically on networks only available to real estate agents. And when inventory is low and there is strong competition among buyers, it’s so important to work with an agent that can tap into these networks and keep you informed on new opportunities.

At @properties, all of our agents and their clients have access to Zenlist, a home search app that includes both active listings from the MLS and pre-market listings, all in one collaborative platform. Meanwhile, @properties’ internal @agent app is another resource that helps our agents match buyers with homes for sale. Reach out to an @properties agent to learn more about these networks.

Get Pre-Approved

An up-to-date mortgage pre-approval (or proof of funds if you’re a cash buyer) is essential if you’re looking to purchase a home nowadays. As a buyer, this not only lets you know what you can afford but also lets the seller know that you’re a qualified buyer, which is especially important in today’s environment if in-person showings are involved.

Talk to your mortgage broker to make sure your pre-approval is current, and if you don’t have a mortgage broker, your agent can share recommendations.

Request a Digital CMA

Whether you’re just starting your home search or preparing to make an offer on a property, a Comparative Market Analysis (CMA) will give you insights into pricing and market activity in your specific area.

@properties’ proprietary Digital CMA takes the traditional CMA (think paper printouts and PDFs) to the next level by providing real-time MLS data in an interactive, digital platform that you can access on the fly. You can also add properties to the report and leave comments for your agent to review.

Ultimately the Digital CMA ensures you always have the most accurate data to make the most informed offer on a property.

Make Your Offer Stand Out

When inventory is low, multiple offer scenarios are more common. If you’re ready to make an offer on a home you love, work with your agent to do everything you can to make your offer stand out, especially if the seller has other offers.

Beyond being pre-approved, there are other ways to make your offer more appealing, such as increasing your earnest money deposit, waiving certain contingencies, or being flexible on terms that may be important to the seller, such as the closing date.

 

Find more tips on how to navigate multiple offers as a buyer here, and discuss the best strategy with your agent.

April 27, 2021

Mortgage Rates Up A Tick

What Borrowers Need to Know About the Uptick in Mortgage Rates

When we recorded our  2021 Market Outlook at the beginning of the year, Proper Rate executive vice president of sales, Dan Moran, talked about how national average mortgage rates were sitting at record lows, with the rate on the 30-year fixed rate averaging 2.65%. Fast forward a couple of months, and that national average rate has jumped to 3.18%*, its highest level since last summer.

While rates in the 3% range are still extremely low by historical standards, the recent increase is a reminder of how quickly the rate environment can change, and why potential buyers, as well as homeowners looking to refinance, may have more incentive to act fast.

“There are a number of factors that drive mortgage rates up and down, so it’s important for borrowers to lock in their desired rate as quickly as possible,” Moran said, adding that a pre-approval is an essential part of the process.

He also noted that applicants should be focused on their payment just as much as their rate.

“In most instances, rates become a psychological trigger in that people want to get the lowest rate possible, but the actual amount of the monthly payment also greatly impacts loan qualification,” said Moran. “If rates are up or down a half a percent it could decrease or increase the loan amount a borrower could obtain, so it’s something to keep an eye on with your mortgage lender.”

Whether you’re planning to obtain a mortgage for an upcoming home purchase or thinking about refinancing, reach out to a loan officer. Meanwhile, be sure to contact your @properties agent for more information about your local real estate market.

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