Closing costs, as you probably know, are all the fees and expenses that have to be paid on closing day at the closing table. Typically, closing costs run about 3% to 6% of a home’s total purchase price – a few paid by the buyer, some by the seller, and most split between them. And that’s where it gets confusing for most people. Read on to find out about 5 costs Louisville home sellers should prepare for at the closing table.
1. Agent Commissions
Typically, at the closing table, Louisville home sellers pay both their and the buyer’s real estate agent commissions. “Real estate commissions may vary, but the average rate is 5% [to 6%] of the total loan value. The buyer’s agent and the seller’s agent split the fee evenly.”
The 5% to 6% commissions mean that for a $300,000 home you’d wind up paying $15,000 to $18,000 in agent commissions. That may sound like a lot, but you also have to consider how much you’re getting for your money. Your agent will do all the selling legwork for you – updating your listing, arranging viewings, scheduling and taking care of paperwork, and doing various other numerous small tasks like arranging photography of your home. Basically, the time savings is enormous.
Sometimes, though, it’s possible to negotiate the commission. To find out more about agent commissions, contact a Louisville agent at (502) 230-1770.
2. Transfer Taxes
Transfer taxes are applicable when the title to a property is transferred from one party to another – in this case, the title to your home being transferred from you to the buyer. It may be assessed at the municipal, county, or state level.
The amount of transfer taxes usually depends on the location of the sale. For example, there is no real estate transfer tax in 12 states, and Arizona charges a small flat fee of just $2.00. In all the other states, transfer taxes range from 0.01% to 5% percent of the sale price of the home.
Again, if you’re unsure about transfer taxes in Louisville, talk to your agent at (502) 230-1770.
3. Buyer’s Home Warranty
Homeowners insurance, as you know, typically covers the structural aspects of your home for damage by such things as fire or natural disasters. A home warranty, however, has a different purpose, and it is another of the costs Louisville home sellers should prepare for at the closing table.
The home warranty can and often does cover the cost for repair and/or replacement of appliances and systems such as electrical, plumbing, and HVAC. Some sellers opt to purchase such a home warranty before getting to the closing table so that the buyer will be assured she isn’t facing any repair costs on signing the dotted line. Many other buyers offer to pay for a one- or two-year warranty upon closing. While not necessarily a requirement, the home warranty is common and runs between $300 and $600.
4. Mortgage Payoff
If you still have a mortgage on your home, you’ll also be facing a mortgage payoff at the closing table. In most cases, sellers use the proceeds of the sale to pay off the remaining mortgage.
Keep in mind, though, that you may also have to pony up some cash in the case that the sale proceeds fall short of the mortgage and the prorated interest. In addition, there may be a prepayment penalty when you pay off your mortgage loan ahead of schedule. These penalties usually run about 2% to 4% for the original loan amount.
5. Prorated Property Taxes and Title Insurance
You should also be prepared for two more expenses at the closing table: prorated property taxes and title insurance.
PRORATED PROPERTY TAXES
“When you sell your home, you must pay property taxes that accumulate up to the date of the sale. These dues can vary widely by state and municipality, so check your local county clerk’s office to see what you owe before closing. After you’re up to date on property taxes, the buyer takes over the dues.”
The title insurance is usually paid by the seller. Unlike other kinds of insurance, it “doesn’t involve a monthly premium,” just a one-off payment. After you make the single payment during closing, title protection exists for the term of homeownership. “In most states, title insurance costs 0.5% – 1% of the total value of your home loan.”
The Agent Advantage
These are the major and most common expenses sellers will have to pay at closing, but there can be and often are others. A lot of it depends on location and the stipulations in the sales contract. That’s why it’s so critical to have an experienced Louisville agent in your corner – so that you don’t come up against any costly closing-table surprises. So to be fully prepared for everything you may face at the closing table, contact us today at (502) 230-1770.