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Mitch Rolsky
Mitch Rolsky - REALTOR®

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Home Seller Closing Costs ???

Home Buying Closing CostsClosing Costs decrease your net at closing which impacts what you need with the down payment, Purchase Price & Closing Costs on your Next Home.

Typically fees include items like brokerage fees, government recording fees, title insurance and real estate taxes and some fees can be impacted by the many types properties. Learn about these fees below.

Typically a  listing agreement between a seller and the agent’s broker gives the broker the right to exclusively market the home. In return for bringing a buyer to the table, the seller agrees to pay a commission to the broker.

 

Usually, this fee is represented as a percentage of the sales price and is shared between the listing broker and the buyer’s agent. The amount of this fee is generally 7% and is typically shared equally with the Buyer’s Agent. As home values increase above $300,000 the amount of commission may decrease to 6% or even less for very expensive homes. While some discount real estate brokerages may offer lower rates be sure to fully understand what if anything you are waiving in the way of services, expertise, marketing etc. in return for the lower commissions. Also be sure to have the Agent include in the listing agreement what portion of the commission will be shared with Buyer’s Agents.

 

Many Brokerages also charge a Transaction or Commission related to Document Management for the sale. With Mitch this amount is $179 and is only paid when you close on the sale of your place.

Most Buyer’s lenders require a title insurance policy to protect the lender against an error in the results of the title search. If a problem arises, the insurance covers the lender’s investment in the mortgage.

 

There are typically two title insurance policy’s. Both are one-time premiums are usually based on the purchase price. One is typically provided at an expense to the seller showing that the seller has the ability to sell the home without any issues. The second policy is for the benefit of the lender who is extending a new mortgage and is typically paid by the buyer.

 

The amount of title insurance will vary based on the purchase price of the home. Below lists some typical amounts

Purchase Price                      Seller’s Title Fees

$100,000                                   $   650.00

$200,000                                   $   830.00

$300,000                                   $   940.00

$400,000                                   $1,000.00

 

A closing protection letter (sometimes “insured closing letter” or “CPL”) forms a contract between a title insurance underwriter and a lender, in which the underwriter agrees to protect the lender for actual losses caused by certain kinds of misconduct by the closing agent. Examples would be failure to follow written closing instructions or fraud or dishonesty in handling the lender’s funds or documents. The typical cost for the CPL is $25-$45

In Indiana Real Estate taxes are billed 2 x per year. 1/2 of the year is billed in the spring and the 2nd payment is billed and due in the fall. However, the taxes are billed one year behind.  So taxes paid during the current year are actually covering the prior year.

 

Typically most Sellers will pay taxes on the property for when they owned it. So, this means that sellers will almost always owe taxes at closing that often times might not even have been billed by the taxing authority yet.   In some instances the Buyer’s lender may require these taxes be paid at closing to the city while at other times, since there will be enough time for the Buyer to escrow or build up the amount that will be due, the lender will allow these taxes to be given to the buyer in the form of a Credit against what the buyer would otherwise bring to closing.

 

As a general rule the amount of this expense, on homes being resold, will be either just over or just under a full year’s worth of real estate taxes.

This would include the fees to release the mortgage and deed recorded in the seller’s name. This will generally run $80 -$100.
As part of a purchase agreement a buyer may ask the seller to pay a portion of the buyer’s closing costs. If  the buyer is financing 100% of the purchase price, their lender might limit a Seller’s credit to 3% of the purchase price. Depending on the Buyer’s credit scores and the amount of down payment, the lender might allow a Seller to pay as much as 6% of the purchase price towards the Buyer’s Closing costs.

 

Keep in mind that when the Seller pays closing costs for the Buyer the home must now appraise for the the total purchase amount INCLUDING the closing costs for the Buyer. If a Seller got top price for a home and then agreed to pay closing costs for the Buyer on top of that top price the odds are good that the home will not appraise for the total amount. If the Buyer does not have the funds to cover the closing costs, when this happens, then this could kill a purchase. 

Many Buyer’s belive that Sellers delay maintenance when they know they will be selling a home. Since home buyers hope to minimize the financial impact after closing related to malfunctions with the components in their new home most will ask the Seller to pay for a home warranty.  First time home buyers with no experience maintaining a home may consider having a home warranty a critical piece of their offer on a property.

 

Home Warranty plans provide for specific types of coverage, be sure to fully evaluate the coverage in each policy before selecting a plan. Typically:

  • If a home system or appliance breaks or stops working, the home owner calls the home warranty company.
  • The home warranty company calls a provider with which it has a business arrangement.
  • The specific provider calls the home owner to make an appointment.
  • The provider fixes the problem. If an appliance is malfunctioning and cannot be repaired, depending on contract coverage, the home warranty company will pay to replace and install the appliance.
  • The home owner pays a small deductible usually $75- $100.

 

Home warranty plans will run $350 – $600 with most plans costing $400 to $500. Most Buyers will ask for the Seller to pay for the plan but like many things this is 100% negotiable.

Many Homeowner Associations (HOA) have fees associated with setting you up and/or removing you in their systems. This fee typically ranges from $100 to $300.   These fees are especially common with condominium developments as well as neighborhoods that employ management firms. These fees are typically shared equally between the Buyer and Seller
Closings are typically conducted by title insurance companies who charge generally $300-$400 for this service.   Typically all parties involved in the sale–the buyer; the seller; the real estate agents; and representatives from the title firm- meet to sign forms and transfer funds.

 

This fee is typically shared equally between buyer and seller but is negotiated as part of every purchase agreement.

Power of Attorney (POA) is a legal document authorizing one person to act on another’s behalf.  A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time. In this case a POA typically gives an individual the ability to sign on behalf of a buyer or seller at closing for the purchase or sale of a property.   The Title company completing the closing usually must prepare the POA and this can cost $75 – $150.
A fee is typically imposed by your lender, this charge ranges from $35-$150 and covers the costs of processing a pay off letter. This is a very Typical cost.
If your loan was for 80% or more of the purchase price most lenders required that you pay for homeowner’s insurance, and flood insurance (if applicable).

 

After you close on the sale of the property contact the Insurance firms and cancel your coverage(s) on the property. You will need to give them a new address and they will send you a refund check for any unused insurance premiums. The amount can vary based on the time of year you sell the property vs. the anniversary of when you first closed. If you are just past your anniversary date the amount of refund will be larger than if you are just before your anniversary date.

If you loan was for 80% or more of the purchase price Most lenders required that you set aside money in an escrow (or reserve) account to pay for property taxes, homeowner’s insurance, and flood insurance (if applicable).   Lenders used these escrow funds to ensure that these items/expenses are paid on time and to protect their interest in your home. After you close on the sale of the property, and the mortgage is paid off by the Title Company you will get a refund check from the lender for any unused amounts that were in the escrow account. The amount can vary based on the time of year related to when tax payments are due and the anniversary of when you first closed or later refinanced the property. Typical refund escrow amounts include 2-3 months of Home Owners Insurance and 2-3 Months of Property Taxes.
If you pay monthly, quarterly, semiannually or annually homeowner association (HOA) fees then any amounts that would cover the time after you close should be refunded to you by the buyer at closing.