How Much Are Closing Costs for Sellers?

Closing costs are not just the responsibility of the buyer – sellers also have their own expenses to consider. On average, sellers can anticipate paying between 6% to 10% of the sale price in closing costs, which includes agent commissions, transfer taxes, and title fees. These costs can quickly add up and vary significantly depending on the location. For example, selling a property in San Francisco, CA, will incur higher transfer taxes compared to Phoenix, AZ, where such a tax does not exist. Understanding closing costs for sellers can help homeowners effectively budget, plan ahead, and avoid any last-minute surprises at closing.

What are closing costs for sellers?

Closing costs encompass the fees and expenses necessary to finalize the sale of a property. They cover everything from real estate agent commissions to title insurance, escrow fees, and transfer taxes. Most of the closing costs for sellers are typically deducted from the proceeds at closing, eliminating the need for upfront payment. However, there are additional costs associated with selling a property, such as repairs, staging, and pre-listing inspections, that may need to be addressed before closing.

How much are closing costs for sellers?

On average, sellers usually pay between 6% and 10% of the sale price in total closing costs. This percentage includes real estate agent commissions, title insurance, escrow fees, and potential seller concessions. However, the exact amount varies based on several factors like location, property type, and negotiated terms.

Here’s a general estimate of different seller closing costs:

Breakdown of closing costs for sellers

1. Real estate agent commission

One of the most significant closing costs for home sellers is the real estate agent commission, typically ranging from 3% to 6% of the sale price. Traditionally, sellers covered the full commission, paying both their listing agent and the buyer’s agent.

However, with recent changes in commission structures, sellers now have more flexibility in how these fees are handled. Sellers can negotiate their commission directly with their listing agent, usually falling between 2.5% and 3%. Sellers are no longer obligated to pay the buyer’s agent’s commission, but buyers may request their contribution to this fee as part of their offer, similar to how price or closing costs are negotiated.

In competitive markets, offering to cover some or all of the buyer’s agent’s fee may attract more buyers. Ultimately, sellers should carefully consider this decision when assessing offers and negotiating the sale.

2. Transfer taxes and local fees

In certain states, counties, and municipalities, sellers are required to pay transfer taxes, calculated as a percentage of the sale price or property value. These taxes can vary significantly based on the location. For example, some areas may impose 0.5% to 2% of the sale price as a transfer tax, while other regions may not have a tax at all.

In addition to transfer taxes, there may be other local fees like certification or inspection fees mandated by local governments before the property can be officially sold. These costs typically range from $100 to $500, depending on the area. Sellers should consult their real estate agent or local government office to determine the exact transfer taxes or local fees they may be responsible for during the closing process, as this will impact the overall closing costs for the seller.

3. Closing fees and other administrative costs

Closing fees are administrative costs related to the home sale and title transfer. These fees may include:

• Escrow fees: Fees charged by the escrow company handling the transaction, usually shared between the buyer and seller.
• Title search fees: A fee to research the property’s title and ensure there are no liens or ownership disputes.
• Recording fees: Fees for registering the new owner in the public records.

These administrative closing fees typically range from $250 to $1,500, but the exact amount will depend on the local jurisdiction and the complexity of the transaction.

4. Owner’s title insurance

In many states, sellers provide the buyer’s title insurance to safeguard against future ownership disputes. This one-time premium costs between $500 and $2,000, based on the sale price and location.

While not typically mandatory, covering title insurance can enhance a property’s appeal to buyers, especially in a competitive market.

5. Prorated property taxes and utilities

At closing, sellers must pay property taxes up to the sale date. If the property is sold mid-year, property taxes will be prorated, meaning the seller only pays for the portion of the year they owned the property.

Similarly, utility bills like water and electricity are typically prorated based on the closing date. These costs can range from a few hundred to several thousand dollars, depending on local tax rates and the sale date.

6. Mortgage payoff balance

If the property has an outstanding mortgage, the remaining balance must be settled at closing. The lender issues a mortgage payoff statement, including:

• Principal balance
• Accrued interest
• Possible prepayment penalties (less common but can amount to 1%–3% of the loan balance).

Sellers should request a payoff statement early to avoid any last-minute surprises.

7. Seller concessions

Seller concessions are an additional closing cost that sellers may cover to help reduce the buyer’s upfront expenses. These can include offering a seller-paid rate buydown, covering part of the buyer’s closing costs, prepaid taxes, insurance, or even home repair credits.

Concessions are negotiable but typically range from 1%–3% of the sale price. Certain loan types, like FHA and VA loans, limit seller contributions to 3%–6% of the purchase price. While concessions can attract buyers, they reduce the seller’s net proceeds, so they should be strategically utilized.

8. Other potential closing costs for sellers

While the aforementioned closing costs for sellers are common, there are a few additional costs that could arise depending on the sale, including:

• Attorney fees: In certain states, sellers may need to have an attorney present at closing.
• Home warranty: Some sellers opt to purchase a home warranty for the buyer, covering repairs to major appliances and systems for a limited period post-sale.
• HOA fees: Sellers are responsible for prorated HOA dues up to the closing date. Additional fees may include transfer fees (usually $100–$500) and costs for HOA documents (typically $100–$400). Special assessments for significant projects may also be due at closing, depending on the circumstances.

Common mistakes sellers make when estimating their closing costs

Focusing solely on commission fees

While agent commissions often constitute a significant portion of closing costs for sellers, they are not the only fees to consider. Sellers may concentrate heavily on negotiating commissions with agents and overlook other crucial costs like repairs, buyer credits, or closing-related documentation. Neglecting these additional costs can lead to unexpected expenses or confusion during the final proceeds calculation.

Misjudging seller concessions

In competitive markets, sellers may be tempted to agree to cover a substantial portion of the buyer’s closing costs to expedite the deal. However, sellers sometimes misjudge the amount to offer. Agreeing to too many concessions can significantly impact profits. It’s essential for sellers to evaluate the market and buyer’s needs before committing to concessions, as excessive offerings can diminish the overall sale price and reduce net proceeds.

Not factoring in prorated expenses

Sellers may overlook prorated expenses like property taxes, utilities, and homeowner association (HOA) fees. As previously mentioned, sellers are accountable for paying their share of these costs up to the closing date, and these amounts can vary based on the closing date. Selling a property late in the year, for example, can result in significant prorated property tax costs alone.

How to reduce closing costs for sellers

While some costs are unavoidable, there are strategies to lower closing costs. Here are a few ways to minimize closing costs for sellers:

• Negotiate agent commissions: Sellers can negotiate a reduced rate with their listing agent and discuss who will cover the buyer’s agent commission, potentially decreasing overall costs.
• Shop around for title and escrow services: Title companies and escrow providers establish their fees, so comparing options can help sellers find the most cost-effective solution.
• List your home at the right time: Selling your property in a robust seller’s market can lead to higher offers or better negotiation leverage, reducing the need for price adjustments or offering seller concessions.
• Negotiate closing costs with the buyer: Sellers can negotiate which closing costs they will cover, such as HOA fees or title insurance costs, potentially reducing out-of-pocket expenses. If the buyer is rolling in closing costs to their mortgage, they might be willing to contribute more to secure the deal.