If you list your home or condo with a Realtor and they sell it, the rule of thumb is that your closing costs will be about 9 percent of the purchase price. Typically, 6 percent is real estate commission. Additional seller closing costs may include lender payoff fees, property taxes, HOA dues, HOA document and transfer fees, escrow fees, title fees, transfer taxes, etc.
If you have a mortgage when you sell a house, your lender will collect the principal balance, any unpaid interest, and also charge some fees to close the account.
- Principal Balance
- Interest – any accrued interest, through close of escrow date
- Demand Fee – cost to provide a payoff amount to the escrow company. Also called a Statement Fee.
- Reconveyance Fee – cost to close the loan and to release the lender’s interest in the property, and reassign ownership (albeit briefly) back to the seller. Also called a Release Fee.
- Reconveyance Recording Fee – cost to record the Deed of Reconveyance at the County Recorder’s Office. The Deed of Reconveyance transfers the property title from the lender (also called the beneficiary) to the borrower (also called the trustor).
- Any Unpaid Late Fees
Depending on the time of year of the sale, there may be unpaid property taxes, which are pro-rated until close of escrow. If property taxes have already been paid in advance, the buyer will credit the seller a pro-rated amount from the date of sale.
Homeowner Association (HOA) dues are also pro-rated. If they have been paid in advance, the buyer will credit the seller a pro-rated amount from the date of sale.
The HOA charges document preparation and transfer fees, which are usually paid by the seller. The seller is required to provide HOA documents for the buyer’s review, including the CC&Rs (Conditions, Covenants, and Restrictions), board meeting minutes, and articles of incorporation. The HOA charges a document preparation fee to assemble this package. The HOA also charges a transfer fee to register the buyer as the new owner.
The escrow company handles all the funds in a real estate transaction. In Southern California, buyers and sellers usually pay their own escrow fees. The fee for each party is based on the purchase price, which is approximately $2 per $1,000 purchase price, plus a $200 base fee. Additional fees include courier, document preparation, and other services provided over the course of the escrow.
The title company provides title insurance to both the buyer and the lender. The seller usually pays for the buyer’s Owner’s Title Policy, while the buyer pays for the Lender’s Title Policy. Title insurance protects a policyholder against challenges to rightful ownership of real property, which arise from circumstances of past ownerships. The Owner’s Title Policy premium, which is paid only once, is based on the purchase price. Other title charges include subescrow and wire fees, if the seller has an existing mortgage.
Documentary Transfer Tax
In California, the seller pays the Documentary and Property Transfer Tax, which is usually $1.10 per $1,000 of purchase price. Some cities have higher rates. This tax is split between the County and the City.
Broker commissions are divided between the listing agent’s and buyer agent’s brokers. The commission is negotiated between the seller and the listing agent, and is almost always a percentage of the purchase price.
The Residential Purchase Agreement outlines the terms of the sale. Terms can include a seller credit towards buyer closing costs, or a buyer credit towards seller closing costs. Buyers often request a one-year home warranty, a natural hazard disclosure report, and a termite inspection. Buyers may also request that the seller complete repairs, such as fixing a plumbing leak, replacing a roof, or clearing a termite infestation and repairing termite damage. Repair requests are negotiated between the buyer and seller after inspections are completed.