What Kind of Fees Do Home Sellers and Home Buyers Pay When Selling or Buying a Home?
Here are fees sellers should prepare for when selling a house:
Photo: Nexus Homebuyers
1. Closing Costs
1%-2% of Sales Price on Average Home buyers pay quite a bit in closing costs, usually between 2%-5% of the sales price of the home. However, sellers can expect to pay closing costs as well. Any money going into escrow has a fee that is usually split between the buyer and seller. Besides escrow expenses, you may have to pay a pro-rated amount of your property taxes and HOA fees. Most types of mortgage loans also allow the seller to pay closing costs for the buyer. Many sellers will not agree to this, especially in a sellers market. In a buyers market where home sales are slow, you may have to pick up a portion of closing costs for the buyer to be able to afford the home. An experienced real estate agent can help you negotiate the best deal on your behalf, keeping as much money in your pocket as possible.
2. The Real Estate Agent Commission
The majority of the costs of selling a home are real estate agent commissions. When you hire a real estate agent to sell your home for you, the typically commission is 6% of the final sales price. The sellers agent will split this commission with the buyers agent. In some cases you may be able to negotiate the commission percentage with an agent. There are discount agents who will accept a lower commission but do minimal work. However, most experienced realtors will not negotiate commissions. There is a lot that goes into selling a house as an agent. They have to market it, host open houses, answer emails and calls regarding the property, and may show the home to some buyers. Listing agents work hard and a 3% commission for selling your home is more than fair. But this eats into your profits. For example: Let’s say you have $300,000 mortgage balance and your home sells for $450,000. $150,000 is left after paying off the remained of the mortgage loan. The real estate commissions you pay are 6%, or $27,000. Cutting your take from $150,000 to $123,000.
In the Bay Area, staging for one bedroom costs an average of $3,500, two-bedrooms over $4,000. Staging a home is when you have a company put furniture inside the home. Staging a home before selling it has been proven to help sell a home faster. It makes the home appear larger and gives each room a purpose, buyers are able to see how good the home will look with furniture in it.
4. Interior Painting
$1000-$1500 Average Painting the interior walls a neutral color will add to the appeal of a home. Dirty walls, and unique colors are a huge turn-off to homebuyers. Freshly painted walls give the appliance that your home has been taking care of and greatly improves the perceived value of a home.
5. Transfer Tax
U.S. Average $750 Not all cities and counties will charge a fee to transfers taxes into the new owners name. Usually, the transfer fee is a percentage of the sales price, the more expensive the home, the larger the fee will be.
6. Carpet Cleaning
$100-$200 Dirty carpets scream “I need to be replaced!”. That’s extra money and another headache a home buyer doesn’t want to worry about. By cleaning the carpets to look almost like new goes a long way in maximizing how much sell your house for. Carpet cleaning companies usually charge per room, which can add up. Save money by doing it yourself, steam carpet cleaners are for rent at places like, Home Depot and Lowe’s for less than $50.
7. House Cleaning
$150 Average The house should be throughly cleaned for the buyer before closing day. Cleaning services for an average sized home can cost around $150 dollars on average. If you don’t mind a little manual labor and have time on your hands you can save money by doing it yourself.
8. Lawn Care and Landscape
$100-$200 having a freshly mowed yard and all trees and bushes neatly trimmed improve the “curb appeal” of your home. Improving the curb appeal of your home can help sell your home quicker and may help fetch you more money. Again, to save money you can do this yourself, saving on landscaping services.
9. Lawyer Fees
$1000 (Not always Required) You may need a real estate attorney to oversea the real estate transaction. Attorney fees can range anywhere from a few hundred dollars to a couple thousand.
10. Title Insurance for the Buyer
$1,000 In are there are any issue’s with the title to the home, title insurance protects the buyer in case there are any liens or other issues. The buyer pays for lender title insurance, but the seller is responsible for the buyer title insurance. The cost ranges between $750-$1000 depending on the purchase price of the home.
11. Mortgage Payoff
Your mortgage loan will be paid off with the money collected from the sale of the home. You will receive what is left over after all fees and costs are deducted.
Even if you have moved out of the house you’re selling. You will need to continue paying for electric, gas, and water. A home without electricity will be a very tough sell.
13. Home Repairs
In order to get the maximum amount of money for your home you’ll want to make repairs. If there are any items that are not working or something that you have been meaning to do but never did. You should make all repairs necessary to ensure you get top dollar.
14. Inspection Repairs
Inspection costs somewhere between $450 – $1000 in the Bay Area. Most likely the buyer will have a home inspection performed on the property. If the inspector finds any items that need to be repaired, the seller will need to pay to have repairs done prior to closing.
Here are fees buyers should prepare for when buying a house:
Photo: Real Estate Suggestions
1. Private Mortgage Insurance
You may be required to purchase private mortgage insurance if you’re putting less than 20 percent down on a home. Private mortgage insurance, commonly referred to as PMI, is typically provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. There are two kinds of payments: an upfront PMI premium and a monthly PMI premium. The upfront premium can be paid at closing, or be rolled into the loan. Just remember that rolling this payment into the loan–and the monthly PMI premiums–can affect the size of your mortgage payment.
2. Homeowner’s Insurance
When borrowing money to purchase a home, insurance is a requirement you can’t skip out on. A homeowner’s insurance policy combines personal liability insurance and hazard insurance to cover a dwelling and its contents. In many cases, this means buying a policy before closing on the home. You’ll have to pay the first year’s premiums to your insurance company to show that you have insurance in place before you close. After that, you can escrow the annual premiums into your mortgage payment.
3. Title Insurance
Title insurance is designed to protect the lender in case an issue arises with the title to the home you’re buying. You’re usually required to buy lender’s title insurance, which is rolled into your closing costs or financed into the loan. Title insurance for yourself is optional, but it’s something to consider if you’re worried about a title issue affecting your ability to keep the home after the fact.
4. Appraisal Fees
An appraisal is needed so that a current fair market value for your home can be established for tax purposes. It’s a written justification of the price paid for a property, primarily based on comparable sales of homes nearby. The lender needs the appraisal to make sure the home is worth the amount you want to borrow. This is one fee you’ll pay to the lender up front before the appraisal can take place.
5. Escrow Fees
During the closing process, an escrow account will usually hold the money while the buyer and seller finalize the agreement. In addition, you’ll probably have a portion of your monthly mortgage payment go into escrow in order to pay for property taxes and insurance. Essentially, you prepay some of the homeowner’s insurance and property tax costs for the home ahead. Each month, part of your mortgage payment is diverted to this escrow account so that your annual property taxes and homeowner’s insurance premium can be paid on their next due date.
6. Points or Origination Fees
An origination fee is paid to the bank or lender for their services in creating the loan. A point is 1 percent of the loan, and is often worked into the total cost of the loan. Similar to escrow payments for insurance or property taxes, these additions can increase your monthly mortgage payment.
7. Credit Report Fees
In order to secure a loan, the lender will require a verified credit report. This fee is typically small, around $25-$40, and the lender may ask you to pay it when the credit check is done, or add it into your closing cost total.
8. Document Preparation Fees
The lender, broker, or closing attorney will usually have a fee to cover the preparation of the required documents for the loan and closing paperwork. These fees are typically rolled in closing costs for the home and may be covered by either the home buyer or seller.
9. Survey Fee
A survey is a drawing or map showing the precise legal boundaries of a property and other details. If an existing survey of the land cannot be obtained, a new survey will have to be conducted in order to determine exact boundaries of the property.
10. Pest or Mold Inspection
While not generally required for a brand new home, the purchase of an older home may require an inspection for pests such as termites as well as mold. This requirement can vary by location, and the cost usually runs between $200 and $500.
11. Property Taxes
In some cases, you may owe some property taxes immediately if the seller has already paid taxes for a time period where you will be the owner. Also, there may be other municipal taxes or fees for sewer or water that need to be taken care of. These fees are usually escrowed at closing.
12. State Recording Fees
Depending on where you live, there may be a fee required for recording and holding the information regarding the sale with your county register of deeds.
Keep in mind that not all of these fees will always apply and they may even vary from state to state. Some may be waived or paid for by the lender or home seller. Regardless, it’s important that you understand what the fees are and who is responsible for paying them.
Before you finalize the purchase of your home, talk to your real estate agent, lender, or closing attorney and ask for a preliminary HUD statement. This standard form is used across the United States to itemize services and fees charged to the home buyer by the lender or broker when applying for a loan. Reviewing this statement before finalizing the purchase of your home will help you understand what fees you’re responsible for.