How much are closing costs for the seller?

If you’re thinking about selling your home, you’re probably excited to see how much you’ll make from this investment. However, before you can pocket the purchase price, your home sale earnings will need to cover the costs of the transaction.

The average closing costs for sellers typically amount 8% to 10% of the purchase price of the home. However, closing costs are negotiated between the buyer and seller and the amount will vary depending on local laws and standards, your home’s value, and the individual deal you strike with the buyer.

Average closing costs for sellers

Closing costs are the fees associated with a real estate transaction. The seller and buyer are each responsible for their own set of closing costs. The sale price often covers seller closing costs, so you won’t need to set aside any additional money for this expense unless you owe more than your home is worth. 

Here’s a breakdown of closing costs for different homes, based on the average closing cost of 8% to 10% of the home sale price. These estimates exclude any mortgage payoff contributions.

→ Learn more about how long closing takes

Breakdown of seller closing costs

Closing is the last step in the home sale process. At closing, the seller and buyer officially transfer ownership of the home by signing the final documents and distributing the sale funds. Your escrow manager will facilitate the process, helping you with everything from ordering title insurance, preparing closing documents, and communicating with third parties like your HOA.

Here are the seller fees that you’ll typically need to cover:

Attorney’s fees

Some states require real estate attorneys to complete a home closing. For example, New York law calls for attorneys, while Texas does not.

If your market requires an attorney, you may be responsible for paying their fees. Attorneys generally cost anywhere from $150 to $500 per hour, or some charge a flat fee ranging from $800 to $1,500 or more.

Escrow fees

These fees are paid to an escrow service in exchange for acting as a neutral third-party for the real estate deal. The escrow service is a vital part of any home purchase or sale, as they act as the intermediary that holds the earnest money deposit, necessary documentation, and any other fees related to the transaction.

Escrow fees are negotiated between the buyer and the seller. There is no standard, but many choose to split this fee 50/50 since both parties equally benefit from the service.

Mortgage payoff

For most sellers, the most significant cost to cover is the remaining balance on your mortgage. This will include the remaining principal as well as the interest you’ve accrued up to your closing date — not the lifetime interest of the loan. Though rare, some lenders also charge prepayment penalties for ending your loan early, so factor that in if necessary.

→ Learn more about selling a home with a mortgage here

Prorated HOA fees and transfer fees

Most HOAs collect dues on a monthly basis or yearly basis. It is common for the buyer to pay any prorated HOA fees at closing, however, the seller typically pays the HOA transfer fee. This fee covers the cost of conferring ownership of the home to the new owner. The HOA is responsible for disclosing any transfer fees to both the buyer and the seller before closing.

Additionally, if the seller is overdue on any HOA fees, they will be due before closing. In most instances, a seller cannot close on a sale before these fees are paid. In some cases, a buyer will agree to pay these HOA fees to speed up the transaction.

Prorated state property taxes

Homeowners are billed for state property taxes only a few times a year. On your closing day, you’re responsible for the taxes that have accumulated since your last payment. Sellers typically cover this expense, since they were the proprietors of the home during the tax period.

Real estate transfer tax

Depending on the location of your property, there may be a fee for transferring ownership of the home – the exact amount can drastically vary from state to state. For example, Texas has no transfer taxes, Arizona has a $2 flat fee, and Delaware has a 1.5% fee.

Realtors’ commission

Home sellers are usually responsible for any fees charged by the real estate agents involved in the home sale. This usually amounts to 5% to 6% of the total home sale and is split between the buyers and sellers agents.

→ Learn more about who pays real estate commission

Title and associated fees

A title is a document that verifies your legal ownership of your house. When you sell your home, you’ll pay a title company to transfer the title to the homebuyer. Many title companies also handle your escrow account, which they’ll include in their bill to you. You’ll also need to bear the cost of the new owner’s title insurance, which will protect them in case there are any issues with the deed.

Other costs of selling your home

While technically not seller closing costs, there are additional expenses that come along with selling your home that affect your bottom line including:

• Home improvements: You’ll likely need to spend some money to prepare your home for sale. Common expenses include things like painting, landscaping, as well as any repairs that your buyer may request after their inspection
• Overlapping housing costs: It can be challenging to line up your closing dates for selling your old house and moving into your new one. You can end up paying two mortgages while you wait for your old home to sell or paying for temporary housing until you can find and close on your new home.
• Seller concessions: Depending on your market, it’s common for buyers to ask the seller to cover some of their closing costs. This is called a “seller concession” or “a credit toward closing costs.”

How sellers can calculate closing costs

Your total closing costs are made up of many individual expenses that are variable depending on your location and local laws, your home value, and the purchase agreement you made with the buyer. As a result, it can be difficult to know how they’ll add up.

Having your agent draw up a seller net sheet can be helpful, and your closing manager can give you an estimate of your closing costs ahead of time, particularly for your prorated property taxes, HOA transfer fees, and title fees. About a day before your closing date, you’ll get the final breakdown of all the seller closing costs in your official Closing Statement.

Curious how much you’ll make when you sell your home? Get an estimate with our Home Sale Calculator.