Have you sold a home before? If you have, do you know what closing cost are associated with the sale of your home? If not, don’t worry. In this post I’ll layout what seller paid closing cost, you the seller, are responsible for paying at closing.
What are Seller Paid Closing Cost?
First lets define closing cost. Closing cost are expenses incurred by a buyer and seller to complete a real estate transaction. Keep in minds these cost can go above the sales price, which means you’d have to bring money to the table to close if you don’t have enough equity built up from owning your home. Seller paid closing cost differentiate compared to buyer paid closing cost. However, in todays real estate market buyers are asking the seller to pay for their closing cost. We’ll cover buyer paid closing cost in more detail at a later time but for now we’re focusing on seller paid closing cost.
Below are the typical seller paid closing cost:
1. Brokerage Listing Fee
This can vary depending on which real estate brokerage you decide to list your home with. There’s no set brokerage fee but in the Upstate, the normal brokerage fee to market your property is 6% of the sales price. Typically this fee is split between the buyers agent brokerage and listing agent brokerage. For example, you decided that you want ABC Brokerage to market your property for $175,000. XYZ Brokerage brings an approved buyer and makes an offer on your home. You agree to their offer of $173,500. The total commission payout at closing will be $10,410.00 which would be split evenly (99.9%) of the time with $5,205 being paid to ABC Brokerage and $5,205 being paid to XYZ Brokerage.
2. Deed Preparation
This is drafted by the real estate closing attorney. This document conveys the property from the seller to the buyer and states the warranties and rights that the seller is granting the buyer. Deed prep fess vary from attorney to attorney but this fee ranges from $250-$350.
3. Deed Stamps
When you sell a property, South Carolina charges a deed recordation tax on real estate of $2.60 per thousand for the State Deed Stamps plus $1.10 per thousand for the County Deed Stamps, for a total of $3.70 per thousand of the sales price. This is a seller paid closing cost. For example, you sell your home for $300,000. You’ll take $300,000/1,000 = $300. Then you’ll take that $300 x $3.70 = $1,110. Therefore at closing you’ll have a deed stamp charge of $1,110.
4. Property Taxes Prorated
Vehicle taxes are paid in advance, where property taxes on real property are paid in arrears. You’re probably asking, what the hell is paid in arrears? Taxes paid in arrears simply means that a payment is being made at the END of a period. So your 2018 taxes will not be paid until December 31, 2018 for example. So lets say your total tax bill for your home is $1200 for the year. We’re scheduled to close on the sale of your home May 31st. You, the seller, are responsible for paying property taxes from January 1st through the closing date May 31st. That’s a total of 150 days. You’ll take your total tax bill of $1200/365 days/year = $3.28/day. Then you’ll take that $3.28 x 150 days = $492.00. So your prorated tax bill at closing will be $492.
5. Satisfaction of Mortgages/Liens and Other Cost to Deliver Marketable Title
This is a no brainer unless you your home is completely paid off. If that’s the case, you’ll be getting a large check back at closing. However, if you have a 1st/2nd mortgage or any kind of lien claim against the property, those will need to be paid in full in order to sell the home. Keep in mind that if the equity accumulated over the time of owning the home cannot cover the satisfactory pay off of these items plus the other seller paid closing cost, then the seller has to make up the difference in order to close on the transaction.
6. Buyer Paid Closing Cost
We won’t go into detail about all the buyer paid closing cost but typically buyer paid closing cost can range from 2-5% of the purchase price. It doesn’t have to be a percentage, some buyers will ask that the seller pay a dollar amount. For example, a buyer may make an offer that ask the seller to pay up to $4000 of the buyers closing cost. If the buyers final closing cost dollar amount comes back less then what they asked the seller to pay, the buyer does not retain the difference. Any buyer closing cost that is above the agreed upon dollar amount is the responsibility of the buyer.
As you can see from a seller’s standpoint, the largest closing cost expense is going to be the real estate commissions and the mortgage(s)/lien(s) payoff. Hopefully you’ve accumulated enough equity during the time of your ownership to cover all the basic seller closing cost and to have enough left over for a down payment on your next real estate purchase. If you’re looking to buy or sell in the upstate, give me a call today 864-497-7107!