What is included in closing costs when selling a home?

Closing Cost Formula

If you are getting ready to sell your home, knowing what the customary closing costs for a seller in our area is probably going to be important to you. Here is an overview of the seller’s estimated net sheet that I use when meeting with a homeowner. It makes a lot of sense knowing what you will net from the sale of your home before you actually put your home on the market for sale.

Determine the price. Look at the recent sales in your area to see what similar properties have sold for. Your real estate agent should provide this info. Most real estate agents refer to this as the CMA or comparative market analysis. You can also go through public records (we have a great resource through the Brevard Property Appraisers site https://www.bcpao.us/) You can go to some of the real estate sites that offer their own estimates (Please know that it is an algorithm that figures these numbers out and may or may not be accurate) You can also order an appraisal. For this example, I am using $400,000 as a selling price.

Seller's Estimated Net

You will need to know what you owe on your home. If you do not have a mortgage, it’s pretty easy. If you do have a mortgage; either log onto your account or find your last payment statement for the balance. I recommend adding one payment onto whatever is listed for the payoff amount because there is always some interest that is not included in the balance on these statements. For this example, I am using a $225,000 mortgage balance.

Here in Brevard County; it is traditional for the seller to pay for the following items:

  • Doc stamps on the deed

  • Owners title policy

  • Real estate commission

  • Property Taxes

  • Title Company

Some other expenses that the seller could be responsible for:

  • Estoppel to the condominium or homeowners association (if there is one)

  • Municipality lien search

  • Home warranty

  • VA or FHA loan fees 

  • Seller credit towards buyers closing costs

Now it is time to go over the costs of the sale to determine what your net proceeds will be. Once we subtract out your cost of sales whatever is left is your net proceeds. Sometimes the estimated gross is not enough to cover the seller closing costs & you will need to bring money with you for the sale to occur. This is why it is important to know before you have an offer what you could net from the sale of your home.

Doc stamps on the deed

Doc stamps on the deed. This is a state tax on the recording of the deed. Florida charges 70 cents per $100. For this example, you will pay $2,800

Owners Title Policy. I know other parts of the country, the owner’s title policy is paid for by the buyer. Here in central Florida & Brevard county; it is the seller’s responsibility to pay for this. Florida sets the price for title insurance. It is $5.75 for every $1,000 of value for the first $100,000 & $5.00 for every $1,000 after that. For this example; the title policy will cost you $2,075

Owner's Title Policy

Real estate commission/Brokerage fee. One on one, I can talk about real estate commission! We can discuss specific amounts. BUT, in a public forum like this blog post, anywhere on the internet, or in groups of other Realtors that are not part of my Brokerage, it is considered an antitrust violation. Laws are in place and are designed to protect trade and commerce from abusive practices such as price-fixing, restraints, price discrimination, and monopolization. Real estate commission is considered this. Here is a little more info on Antitrust laws https://www.law.cornell.edu/wex/antitrust Real estate commissions vary and are negotiable.

So, when figuring out the real estate commission; it is more than likely a percentage of the sale. Multiply the sales price by this percentage amount. For this example 400000 X % = real estate commission

Property taxes. Here in Brevard county; our property taxes are paid in arrears. The bill comes due November 1st for the year we are in. For this example, I have property taxes as $3,000 for the year or $250 per month. If your home sells the end of May, you owe 5 months or $1,250. If you have a mortgage and property taxes are escrowed with your monthly payment, you will still need to pay for the property taxes at closing. Your bank/lender will return all of the money they have in escrow after closing. This also includes any insurance escrow they are holding. (Your insurance company will also release the proration of your policy after closing!)

Screen shot of the Brevard County property appraiser site BCPAO.us
Brevard County has an awesome site for property research. http://www.BCPAO.us You should check it out!

The Title Company has charges on the sale they will give a detailed breakdown on the Closing Disclosure (also referred to as a CD & sometimes a HUD). These charges include overnighting documents for payoffs, contacting local municipalities for utility payoffs, storing closing documents electronically after the closing, etc. I use $500 as an amount for the purpose of this estimated net. It is almost always less than this.

If you live in a condominium or homeowners association, the title company will need to order an estoppel to confirm you are current with your dues and do not have any outstanding payments left to the association. This estoppel fee is up to $250 per association. (Viera and Suntree are examples of areas here in Brevard County that have a master association and a sub-association) 

More info can be found on their website www.AHS.com

Home warranty. You could be offering a home warranty with the sale of your home. The buyer could ask for a home warranty with the sale of the home. Warranties range in price based upon the company that offers them to the amount of add-ons that are on the home warranty. American Home Shield is one of the more popular home warranty companies used in our area. https://www.ahs.com/pricing-and-plans/realestate-plan/real-estate-plan-comparison/ At the time of writing this post, their home warranty for a single-family home ranges from $450-$600. Add ons to any of their warranties will add to the price. These items could be a pool, a septic system, or additional appliances (second refrigerator for example). Since the offer presented might not have a request for a warranty, I don’t include this in the first estimate. I do like to discuss the scenarios where it might come up & let you know it could be a $600 charge.

VA or FHA loan fees. If the buyer who presented the offer is using either a VA loan or FHA loan; the loan product has minimal fees for the seller. The VA loan, for example, states the seller will provide the WDO inspection report. (aka a termite inspection) If you have a termite bond on the home, simply call your pest control company and ask for a WDO inspection. Otherwise, a WDO inspection costs $75-$85. I will put $100 on the estimated net if either of these loans is in the offer.

Seller credit to buyers closing costs. This really depends upon the area of the home, the type of loan the buyer is obtaining and the condition of the property. The buyer could ask for up to 3% of the purchase price from you to cover their closing costs. Don’t let this request stop negotiations. If the buyer is using either a VA or FHA loan, their lender could have coached the buyer to ask for help with the closing costs. If the home needs a new roof, AC or septic drain field, a credit towards the buyers closing costs will allow them to have the cash in hand after the sale to do this big repair. 

example of a Estimated Net Sheet - Sheet1-1

Add up all these numbers. Subtract from the estimated gross equity and this is the approximate amount you will receive at closing. The only way to have an exact to the penny figure is to have a title company start gathering all the loan payoffs & estoppels from the various sources. This will not happen until you have a buyer under contract on your home and things are proceeding towards closing. Since you read this article to this point, I am presuming you have plans to sell a property in the near future. When you are interviewing and meeting with real estate agents, make sure they provide an estimated net sheet so you have an idea of what to expect your bottom line to be. Not only do I provide one at our first meeting; I will do one with every offer that comes in on your home & on every counteroffer too. I feel it is important for you to know exactly what the costs are and what you will receive at the closing table. If you would like to meet to discuss this in detail, I can be reached by phone or text at 321-795-1854, emailed at eric@ericlarkin.com, or simply fill out the form below.

About the author:

Eric Larkin is a Broker Associate with REMAX Aerospace. He lives, works, and plays in the Cocoa Beach area. Eric has been helping buyers and sellers with their real estate needs since becoming a real estate agent in 2003. His focus is always on helping, answering your questions, and doing everything possible to make certain you have a smooth transaction from beginning to end.

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