Real Estate Investor · Katy, TX · Member since 2008 · 430 posts · 22 votes
On a general basis on the retail level, what does a seller pay for at closing? I've heard it's usually around 1 - 1.5%, but what exactly is the seller generally paying for at a closing?
Real Estate agent commissions is the biggie. Typically 6%, though it varies. Even if you don't have your own agent (listing agent), the buyer may have one. If you're trying to FSBO, and don't offer the buyer's agent a comission, those agents won't bring their buyers around.
Owner's title insurance is another one.
Tax or utilitity prorations. But that's just money you owe that's not yet been paid. Can also result in money back to you for payments made ahead of time.
Various settlement charges.
Attorney's fees.
I pulled out a couple of recent HUD-1's.
On a $92,500 sales price
Comissions $4625
Owner's title policy $681 (0.75% of purchase price)
Settlement charges from title company $125
Wire fee $25
Water escrow $150
There were also prior year taxes, those wouldn't normally be applicable
Of course, everything is negotiable, but in general terms, the Seller pays for what directly benefits him, and the Buyer does likewise. Pre-paid and un-paid expenses (real property taxes, hazard insurance, special assessments) are typically pro-rated to the day of closing. All is paid according to escrow instructions, which are developed from the purchase contract. This means you need to know when you WRITE the purchase offer, HOW to write it. Once escrow is opened, both buyer and seller have to authorize any changes in escrow instructions.
Typical seller paid items:
Deed preparation; existing mortgage and accrued interest; transfer taxes; commission; title insurance; repairs based on termite inspection report.
Typical buyer paid items:
Hazard insurance; document preparation fees; survey; mortgagee's title insurance; credit report; loan origination fee; prepaid mortgage interest; discount points; Recording fees (deed and mortgage); termite inspection. Obviously, deposit and balance of purchase price above any new mortgage as well.
Certainly, some markets have prevalent practices which may vary somewhat. Your local RE attorney, lender, or RE agent can advise you of local custom.
Thanks. The 6% commission I knew already if you were using an agent to sell the house. I am not selling with an agent, but I would not mind if a buyers agent came and brought a buyer, I would pay the normal 3% to them for that.
My main question meant everything besides commission. But you answered that too.
Also I didnt see metioned - taxes. Not real estate taxes but taxes paid to the state and town for the privilige of selling. These do exist in CT maybe not elsewhere. If I sell I have to pay a total of 1.5% to the town and state.
Dont think they exist in Texas. Though I may be wrong. My dad (my partner) attends all the closings, but in my attempt at learning all I can I will be attending the next closing too.
Also, if you are a foreign investor (out of state OR country) there is FIRPTA, and here in Hawaii, HIRPTA as well which must be withheld from sale proceeds by the BUYER. Failure to withhold could make the buyer actually liable for the tax.
In Austin, TX, the seller usually pays for a Residential Service Contract. We can't call them warranties anymore. They are usually around $350, and cover the appliances, air-conditioning, etc. There are so many of these companies now, many will cover pre-existing conditions.
It's a great way to make first-time home buyers more at ease with the process.