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Selling a house costs a good deal of money. Generally, expect to pay about 7 to 10 percent of the house's sale price in various closing costs for which you, the seller, may be responsible. Typical closing costs include
- Real estate agent commissions: If you're selling your house through real estate agents, they typically take a commission of 5 to 6 percent of the selling price. You don't have to work with agents, and if you do, the commission percentage you pay is negotiable and may be somewhat lower on higher-priced properties.
- Repairs: Unless you've taken really good care of your house over the years, or you're selling in a strong local real estate market, you can also expect to shell out some money for corrective work. For example, in some communities, you may need a pest-control and dry-rot clearance to sell your property. Inspections of your property may uncover building-code violations, such as faulty electrical wiring or plumbing problems, which you must repair. Consider having your house inspected before listing it for sale.
- Transfer tax: Taxes, taxes, taxes — the three sure things in life. Some communities whack you with a transfer tax when you sell your house. Such taxes typically are based on the sale price of the property. Check with your local real estate agent or tax collector's office to get an idea about your community's transfer tax rates.
- Prorated property taxes: Depending on the date you close on the sale of your house, you may owe money to bring your property tax payments up to date. In most towns and cities, unless you're delinquent with your payments, you probably won't owe more than six months of property taxes. In fact, because many communities require that you pay your property taxes in advance of the period that the payments cover, you may find that you're owed a refund of taxes from the buyer of your property.
- Possible credits: If you've paid ahead on your property taxes, you may be getting a "refund" from the buyer of your house. You may also get a refund from your homeowners insurance company for the unused portion of your homeowners policy. And, finally, if you put less than 20 percent down when you originally purchased the house, your lender may have required that you pay a portion of your property taxes and homeowners insurance in advance each month and then held these payments in an impound account. (An impound account refers to money held in a trust account established by the lender which is used to pay property taxes and insurance premiums on your behalf when they're due.) The lender refunds the unused funds from your impound account money when the sale is complete.
Do the necessary research for the above expenses if you want to more closely estimate expenditures on closing costs. Otherwise, for a safe, ballpark estimate, assume that 10 percent of the expected sale price of your house will go toward paying closing costs.
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