Selling your home should be an exciting time and once you understand the details it will be.
Lets assume you’ve received an offer on your home and you’re trying to decide if you should accept the offer or not. Lets take a look at an Estimate of Proceeds which includes your closing costs.
First a seller will have to pay off any Mortgage or Home Equity Loan associated with the home. Interest on the loan will be pro-rated to the day of closing and will need to be included. Most loans today don’t have a pre-payment penalty so there usually is no need to consider this.
The next consideration is Realtor Service Fees. Theses fees vary across the country. The Brokerage I work for charges 7% of the sales price and then splits that 50/50 with the Selling Brokerage. The Brokerages then split their $$$ with the Realtors who represent the buyers and sellers. Where I work there are no additional brokerage fees, but depending on where you live there may be so ask your Realtor.
Property Taxes must be paid to current on the day of closing. In the State of Iowa our taxes are in arrears (meaning you’re paying for past taxes when you’re paying your current bill).
Abstracting is a fee charged to bring your abstract up to date. Iowa is an Abstract and Title state and the Abstract needs to be brought up to date and include the new buyers. Your job as the seller is to have this done.
We also have this thing called Revenue Stamps……What’s this? It’s a county tax that’s charged on the sale of your home. Although not expensive, it too has to be paid in order to transfer title.
The next set of fees are for Deed Preparation and Recording Fees along with a Property Settlement Fee. An Attorney will prepare the Deed for closing. Once signed it must be recorded. The Property Settlement Fee is the $$$ charged by the Escrow company to pay off the loan, pay the taxes and fees associated with the closing and record the deed for the seller.
The remaining expenses vary depending on your purchase contract. The seller may be responsible for the following: Special Assessments, Buyer Closing Costs, Home Warranty etc. All of these expenses will be recorded on the HUD-1 Settlement Form at closing.
As you can see, there’s a lot involved with a Real Estate transaction. There is however nothing to fear, I guide my clients through the process every step of the way.
Here’s a Link to a site I found that explains closing costs in wonderful detail.