What does it cost to sell your home? Whether you use an agent to sell or not, there are costs associated with selling your home. When you're estimating the costs a good amount to go by is 7% of the purchase price. So if your house sells for $100,000 your closing costs will be around $7,000. Today I'll work on itemizing the costs that make up that 7-ish percent.

1. The Commission

This is by far the costliest and most valuable part of selling your home. Here in Salt Lake City the typical commission is 6% of your purchase price. So if your house sold for $100,000 the commission would be $6,000. Half of that goes to the buyer's brokerage and half to the seller's. It is my opinion that selling your home with and agent is 100% worth the cost. I know, I know, I'm an agent, of course that's my opinion. However, there are facts that back me up. Homes sold by agents on average sell for more money and much faster than homes sold by owner. I also help with all the contracts and paperwork and guide you through the complex process. You will not regret hiring me.

2. Title Insurance

The second largest chunk that makes up that 7% is the title insurance. In the Real Estate Purchase Contract (REPC) it states that the seller will purchase an ALTA Homeowner's Policy of Title Insurance for the buyer. This policy insures the buyer against claims against the title that could crop up in the future. 

The cost of title insurance is regulated by state law and based upon the sales price of your home. I don't know the exact way it's determined, but from what I can tell it's usually around a half a percent (.5%) or so of the purchase price. 

3. Other Title Fees

The title company is in charge of preparing all of the documents for closing. They also wire money to pay off mortgages and send proceeds and record deeds and releases of liens. Each title company will charge for these services. The title company I use most often charges $275 for their service. This can vary some from company to company. 

4. Property Taxes

Property taxes on your home here in Utah are due every November. When they are paid you pay eleven months (Jan-Nov) in arrears (back pay) and one month (Dec) in advance. Whomever owns the home when the bill is due pays for the taxes for the entire year. When you sell the home you will be responsible for the taxes from January 1 to the settlement date. The buyer will be responsible for the rest of the year. Since the taxes are only paid once per year, your portion of the taxes will show as a charge to you and a credit to the buyer on the closing documents.

The only time that is reversed is if you close in December. If you've already paid the taxes for the year before you sell your home then the buyer will owe you for the time in December that they will own the house. You pay the taxes for the days you own the house.

That being said, if you have a mortgage on your home the chances are you also have an escrow account. An escrow account is an account you pay money into every month for the property taxes, home owners insurance, and mortgage insurance (if applicable). It's almost always part of your monthly mortgage payment. Once your home is sold and your mortgage is paid off the mortgage company will refund you everything that is in that escrow account. So when you get a charge at closing for your portion of taxes, you will get a refund similar to that amount a few weeks after closing.

5. Water Bill

When you close on the sale of your house part of the job of the title company is to make sure that all the liens against the property are satisfied and to try to prevent any new ones from cropping up to impede the sale. If you fail to pay for your water bill the water company is allowed to place a lien on the property. (As far as I know it's the only utility that can do this. Water laws are weird.) Because they can lien the property the title company will collect an amount from you at closing and pay your final bill to the water company. That amount is always more than you will actually owe. Always. I've seen this amount be $50 and up to $150. It depends on the water company. After the water company does a final reading at your home they will refund you the difference. You do usually need to call for that refund. You'll want to make sure they have your new address too.

6. Prorations - Leases/HOA Fees, Etc.

This one will sometimes apply, but not always.

If you live in an HOA you are responsible for the dues up to and including the settlement date. This could be a charge at closing but it's usually a credit to you. Normally dues are paid at the first of the month for the entire month. If you close on the 15th of the month you would be responsible for days 1-15 and the buyer for 16-30. Since you've already paid for the whole month, the buyer would credit you the amount for days 16-30. There are also often transfer fees to transfer the HOA from your name to the new buyer's. These are usually paid for by the buyer, but the buyer could ask you to cover that for them. That's usually done at the outset of the contract. 

The other proration done for leases. If you are selling a rental property that has tenants living in it you will credit the buyer a couple of things. If there are refundable deposits on the lease you are required to credit the buyer the deposits. Also, you get the rent payments for when you own the house, but the buyer gets them after the sale. So, again, if you close on the 15th of the month and the tenant paid for the whole month on the first at closing you would get to keep the rent for days 1-15 and you would credit the buyer the rent for days 15-30. This is because when you sell a house with a lease the lease is considered sold with the house.

7. Home Warranty

It's very common in today's market for a buyer to ask the seller to provide a home warranty for the buyer at closing. A home warranty typically costs around $500 and will fix things that break in the house for the first year of the buyer's ownership. Things like a broken dishwasher or water heater. This is a common, but optional closing cost as well. 

8. Buyer's Closing Costs

Often times a buyer will also ask a seller to pay for part of the buyer's closing costs. Buyer closing costs are typically 2-3% of the purchase price. So on a $100,000 house that would be $2,000-$3,000. When I have a buyer request these I will often call the buyer's lender to find out what the actual costs will be so that my sellers don't pay more than is actually needed. Sometimes a buyer will pay more for the home in order to have the seller pay these fees for them. It's all negotiated between both parties - typically before the offer is ever accepted. 

And that's about it. Knowing the costs associated with selling your home before you list it will help you when you get your offer. You have a very good idea of what your proceeds will be and you'll be able to negotiate smarter and more efficiently.

If you or someone you know is wanting to sell their house, let me know. I'm happy to help them get it sold for the best possible price.