By Hal M. Bundrick
As a first-time home seller, you know how much you owe on the mortgage, and you’ve got a good idea of your home’s market value. But then come all of the closing costs you’re responsible for.
Unlike buyers, sellers are usually on the hook for real estate agent commissions and title insurance. All told, closing costs for a seller can amount to roughly 6%–10% of the sale price, according to Realtor.com.
Real Estate Agent Commissions
Let’s start with the most significant closing cost the seller typically pays, other than paying off their current mortgage: the real estate agent commissions.
It’s common for the seller to pay the commission for both the seller’s and the buyer’s agents. That’s usually a 6% hit to your bottom line — 3% of the home’s selling price to the agent on either side of the transaction.
On a $250,000 home sale, that would amount to $15,000.
And it doesn’t help to have just one agent involved in the sales process. A single real estate agent will expect to get the full 6% commission.
Of course, you can negotiate fees when you hire an agent, but it’s too late to make any deals when you’re sitting around the closing table handing out big checks.
The Title Insurance Policy
Among the other closing costs that a seller could expect to pay is the lender’s title insurance policy, says Tyler Lee, CEO of Bay National Title in Clearwater, Florida.
Prior to a sale, a title search is conducted to verify ownership. A title policy protects the lender (and the new home buyer if they opt to buy a policy of their own) against unexpected ownership claims that may arise against the property. While not common, an ownership claim can trigger legal disputes — and the fees that come with them.
Closing Costs a Seller Pays
All the closing costs that are often the seller’s responsibility include:
- A property or deed transfer tax.
- Recording fees.
- Any outstanding liens or judgments against the property.
- Repairs required following a home inspection.
- Real estate agent commissions.
- Title insurance.
There are additional closing costs that are split between the buyer and seller, too, including property taxes and any homeowner association dues.
Read and Understand Your Purchase Contract
Closing costs, and whether the buyer or seller pays them, vary widely from state to state — and even between counties in some parts of the nation.
Which party pays what fee may be negotiable, but many filing and recording fees or transfer taxes are determined by the state or local jurisdiction.
And as for knowing for sure what’s going to be your financial responsibility when calculating your closing costs, there’s only one definitive guide: the purchase contract.
“Read the contract and make sure you understand what you’re paying for,” Lee says. “That’s the key.”
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Hal M. Bundrick, CFP, is a writer at NerdWallet. Email: email@example.com. Twitter: @halmbundrick.