What are closing costs for home sellers?

Estimated read time: 5-6 minutes

WASHINGTON — With the current seller’s market, along with high demand and low inventory, many homeowners are dabbling with the idea of putting their house up for sale.

But beware — if you’re ready to find an agent and list your home for sale, there are many hidden fees involved with selling a home that you will want to be prepared for ahead of time.

You want to avoid surprises in the home-selling process and understand the ins and outs of closing costs for sellers – from what’s included to how to negotiate a better deal.

For starters, closing costs are the various fees paid —some by the buyer, some by the seller, in order to finalize the home buying transaction. Many people are aware of closing costs for buyers but may not realize what is entailed in sellers’ closing costs.

Here are a few fees for homeowners to watch out for as they prepare to close on a deal.

Agent commission

The most significant cost that home sellers are responsible for is agent commission fees. Commission rates are usually around 5-6% of the final sale price, split between the buyer’s and seller’s agents. Therefore, on a $300,000 home, commission fees could total $18,000.

Transfer tax

Once you officially transfer ownership of a home, the state, county, and/or city where the property is located will charge taxes and fees. Although sometimes these fees are split, it’s pretty common for the seller to cover these costs. These taxes are usually represented as a percentage of the final sale price and vary by state and location.

Title insurance

A title insurance policy protects its owner from disputes about homeownership.

There are two types of title insurance — lender’s (which protects the lender) and owner’s (which protects the owner). Buyers are expected to pay the lender’s title policy, which is normally required for anyone who is receiving a mortgage. However, the question of who pays the owner’s title insurance depends on the state where the property is located.

Escrow costs

The escrow process begins when a buyer makes an offer on a home. The “good faith deposit” or “earnest money” amount shows they are serious about purchasing the property and are deposited into an escrow account controlled by an impartial third-party.

This impartial third party (aka the escrow company) charges a fee for their services in setting up escrow. Typically, these fees are split 50-50 between buyer and seller and vary depending on where the property is located.

Attorney fees

Real estate transactions are complicated, and a seller’s attorney will help them wade…