How much will it cost me to sell my house/condo?
“Who is going to pay the closing costs?”
Some version of these two questions comes up in every contract negotiation I have ever worked on. To understand the answer, you need to start by knowing two things
#1 - Everything in a real estate transaction is negotiable.
#2 - Things are done a little different depending on your market/area.
Before you commit to working with a real estate agent, make sure they not only understand these two concepts but can also actually show you different ways that these ideas can help save you money.
I am a licensed broker in Florida. Most of my business is done in the panhandle and things vary quite a bit just in my little part of the world. Real estate agents in Destin and on 30-A are used to one way of doing business while agents in Panama City Beach and the surrounding areas have another way of doing things.
However, just because sellers might pay for certain closing costs in one area, does not mean they HAVE to pay for it.
Now let’s dig a little deeper.
In any real estate transaction, there are certain costs that have to be paid. A buyer and seller will negotiate a contract that outlines not only basic items like the price and the date of closing, but also WHO will pay WHAT costs.Remember, this can add up to thousands or tens of thousands of dollars so MAKE SURE YOUR REAL ESTATE AGENT explains these costs to you, line by line.
A majority of real estate contracts are written on pre-printed, boilerplate type forms put together by the Florida Association of REALTORS® and the Florida Bar Association. They are very generic documents and more importantly, very NEUTRAL contracts not meant to favor a buyer or seller.
But of course, you want the best terms for YOU so remember concept #1...EVERYTHING IS NEGOTIABLE. Just because the form has a blank showing that a buyer pays this or a seller pay that does not mean that is how it has to happen. Even most real estate agents just fill in the blanks.
But a good real estate professional knows how to negotiate THE ENTIRE CONTRACT which can save you a lot of money.
Now that you understand the concept of closing costs and know that there is no hard and fast rule governing them, let’s look at the specific closing costs that you as a seller, would expect to see in an offer.
DOCUMENTARY STAMPS ON THE DEED
This is a Florida State tax on the property deed, much like a transfer tax in other states. It is figured on 70 cents per $100 dollars of the sale price. Here are a few examples:$300,000 Sales Price - $2,100 is owed
$178,000 Sales Price - $1,246 is owed
$863,000 Sales Price - $6,041 is owed
TITLE INSURANCE
In the standard Florida real estate contract, THREE fees are lumped together and are commonly referred to as “title fees” or “title insurance.” They are three completely separate fees and DO NOT have to all be paid by the same party but often are.1 - TITLE SEARCH
Like it sounds, the closing agent will research the property to make sure it is free and clear of any liens or other legal problems so that the property can be sold with no problems. This fee can vary greatly. At the time of writing this article, this is generally around $100.2 - CLOSING AGENT FEE
The title company will charge a fee to “close” the transaction. This fee can also be quite different depending on the company that is closing. I have seen anywhere from $350 to upwards of $800 or more. Most often, the party that pays for the title search and owner’s title policy also pays for this but I have seen instances when a company will charge BOTH the buyer and the seller a closing agent fee.3 - OWNER’S TITLE INSURANCE POLICY
The property is researched by humans to make sure there are no problems but remember, humans, make mistakes. Most closings are completed with the buyer received an owner’s title insurance policy but this isn’t mandatory if the buyer is paying cash.The owner’s title insurance policy costs $5.75 per thousand up to the first $100,000 of the contract price then charged at $5.00 per $100,000 up to $1 Million then $2.50 per $100,000 after that. Examples:
- $100,000 Sales Price - $575 cost of title insurance policy
- $278,000 Sales Price - $1,475 cost of title insurance policy
- $634,000 Sales Price - $3,275 cost of title insurance policy
- $1,200,000 Sales Price - $5,575
MUNICIPAL LIEN SEARCH
Just like the title search, the closing agent will also search local municipalities to make sure there is not any type of lien from the on the property that has been imposed by the city or county. On a recent closing statement, the closing agent charged $120.BROKERAGE FEES/COMMISSIONS
The fees charged by a real estate agent/broker often called “commissions” are also known as “brokerage fees.” In almost every non-commercial transaction, a seller has hired a real estate agent to market the property for sale. In my area, sellers are generally paying between 5% and 6% of the sales price for real estate services but this can vary.Buyers normally don’t pay ANYTHING to work with a real estate agent since sellers are paying the fee. Most often, If a real estate agent is working with a buyer that purchases a property, the seller’s real estate agent agrees to pay part of the commission to the buyer’s real estate agent.
Remember this, sellers generally agree to pay ONE amount for a brokerage fee to their real estate agent. If another agent brings a buyer, the buyer’s agent shares the commission with the seller’s agent so the seller doesn’t pay anything extra. The brokerage fee amount can vary depending on a number of things. When selling, be sure to hire a real estate agent that knows marketing. The days of just putting a sign in the yard or listing a property on the local MLS are gone. Your agent must understand internet/social media marketing to be effective...get your money’s worth! Experience is of course also important. Think about it: do you want the heart surgeon that is on his first operation or 500th?
PROPERTY TAXES
In Panama City Beach, along 30-A and Destin, property taxes are paid in arrears. In other words, tax bills come out in November for the year starting in January.At a real estate closing, taxes are most often pro-rated so that the seller pays for the time that they owned the property and the buyer pays for when they will own.
If a closing happens before November, the seller will be giving the buyer a credit at closing for their share of taxes for the year. This way, when the bill comes out in November, the buyer will pay the entire bill, having already collected part of the year from the seller.
If a closing happens after November, AND THE BILL HAS BEEN PAID, the seller will receive a credit from the buyer for the days of the year that they don't own the real estate.
HOMEOWNER’S ASSOCIATION FEES
If the property is in a homeowner’s association (HOA) or condo association, these fees are treated very much like property taxes. The fees are generally collected monthly or quarterly and are pro-rated to the day of closing. Seller pays for the days that they owned the property and the buyer pays for the days they will own. Often times, the closing agent will collect fees from the buyer for the upcoming month/quarter.ESTOPPEL FEE
If a property is in part of a homeowner’s association (HOA), the seller is almost always charged an estoppel fee at closing. The HOA must send an official statement of the seller’s HOA account to the closing agent and charges for doing this. I have seen fees range from $35 to an unusually high $500.HOME WARRANTY
There are a number of third party warranty companies that offer a variety of coverages for a property, generally for one year. Prices run from around $350 to over $800 depending on square footage and what is covered. This charge would only show up if buyer and seller have agreed to it.RECORDING FEES
On the seller’s side, there can usually be one, or a few recording fees that need to be collected to record certain closing documents in the public record. These fees are normally $25 or less.MISCELLANEOUS CHARGES
Sometimes there are policies, warranties or services that the seller has already paid for that can be transferred to the buyer. The seller might get a refund for the time that they don’t own the property on the closing statement.I have outlined mostly SELLER costs here. But please, remember the #1 rule, EVERYTHING is negotiable. Most sellers would expect to be asked to pay these fees in an offer. An experienced real estate professional can help you negotiate not just price, but closing costs as well to save you thousands and thousands of dollars.
