When I work with sellers, especially first-time sellers, it’s important to review closing or settlement costs early.

Particularly nowadays, when equity is skinny, non-existent, or even worse, the property is underwater.

At least for short sale sellers, the transaction closing costs become expenses to the lender that get calculated as part of their net settlement. But in traditional sales, sellers really need to get their heads around the expenses involved in selling their home early on in the process.

As I shared in an earlier post about homebuyer closing costs, in every transaction, buyer and seller can negotiate "who pays what", but once the contract is signed, instructions cannot be changed, unless agreed upon by both parties in writing.

I think I can give you a simple-to-understand explanation of what items are typically included in a seller’s closing costs.

Real Estate Commission: Industry standard commission is 6%. Generally, half of this fee is paid to the Broker for the Buyer. It also covers the split that the Listing Agent pays to their Broker as well as all marketing and advertising expenses.

Property Tax: You’ll be responsible for paying the pro-rata property tax to the last day of ownership.

Assessments & Liens: All assessments, liens, and judgments must be cleared from the title before it can transfer to a new owner. Our escrow company will work with all parties to clear these matters during the escrow period.

Retrofitting: As the seller, you will be responsible for State mandated retrofitting-smoke detectors, water heater strapping, ultra low-flow toilet installation and a gas shut-off valve. Costs can run from $100-$2,000.

Natural Hazard Disclosure Report: This is a $120 required 3rd party report that tells the buyer what, if any, natural hazards might affect the subject property…it’s a pretty interesting read.

Home Warranty: It’s very common that the buyer will ask the seller to pay for a 1–Year Home Warranty Plan. Well worth the expense to a seller. I call it peace-of-mind. Figure $400-$550, depending on the coverage.

Wood Destroying Pest Inspection & Remediation: Every deal is different, but by and large, buyers expect the seller to pay for the termite clearance. This expense can be as little as just the cost of the report, up to as costly as a full tented fumigation and repairs. I’ve seen termite repairs as high as $5,000.

Home Owners Association: If there's an HOA involved, they'll charge $250 for the preparation of documents for the new buyer.

Escrow Services: Figure a $250 base + $1.75-$2 per thousand dollars.

Title Insurance: Cost depends on the price of the property, but NO transaction can occur without it.

Notary, Courier and Delivery Fees: Nominal.

Junk fees: If you EVER find line items in your settlement statement that seem bogus or that don’t make sense, push back on your escrow officer. If the item is trivial, escrow has the power to waive it.

Deed Recording: Nominal, but YAHOO! Typically, as a seller, you'll have costs of about 7.5%-8% of the purchase price in closing costs. Hope this helps.

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