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19 min read Feb 13, 2023

What are the Closing Costs for Seller in Alabama?

closing costs for seller in alabama

Congratulations! You’re now almost at the finish line. But before you pop open the champagne, you have to go through the closing process to transfer the property to the buyer legally.

Closing on an Alabama property can be overwhelming and exhausting. However, familiarizing yourself with the process and various closing costs in Alabama can make the process smoother and easier.

Key Takeaways

  • Closing costs, also known as “settlement costs,” are the final expenses to complete the real estate transaction.
  • Closing costs are separate from the price of the property.
  • The seller and the buyer have to pay specific closing costs.
  • In Alabama, the closing process is usually carried out by a real estate attorney.
  • Due to different fees and statute requirements, closing costs vary in municipalities and states.


What are Closing Costs in Alabama?

Closing costs in Alabama are a set of expenses that must be paid to finalize the real estate transaction and transfer the ownership of the house. Some are closing costs negotiable, while others are non-negotiable, like taxes charged by your state or local jurisdiction.

With a median home value of $282,800, the average closing costs in Alabama for sellers may amount to $22,624-$28,280.

Who Pays Closing Costs in Alabama?

The answer to who pays for the closing costs in Alabama is both the seller and buyer. Although the buyer has to pay more number of fees as closing expenses, a seller has to pay a higher amount as closing costs.

Most of the seller closing costs in Alabama are deducted from the proceeds they get for the property. As such, the seller needs enough equity to cover some of the expenses.

Real estate agents generally know what’s the normal closing cost for buyer and seller in Alabama. So, it’s important to seek professional advice. Hiring an experienced agent can help lower estimated closing costs for seller in Alabama. Remember, some of the fees are negotiable, which your agent can discuss with you.

» Alabama Real Estate Agent List: Read to know about the best real estate agents in Alabama.

How Much are Closing Costs in Alabama?

On average, closing costs in Alabama for sellers can reach up to 8%-10% of the final sale price of the home, not including the mortgage payoff. The biggest closing cost (5%-6%) the seller has to pay is the commission of the listing and buyer’s agent. The remaining 3%-4% includes expenses like home inspection fee, HOA fee, estoppel fee, etc.

Let’s take a deeper look at sellers closing costs in Alabama!

» How Much are Closing Costs in Alabama: Read all about how much closing costs are paid by sellers and buyers in Alabama!

What Are the Typical Closing Costs for Seller in Alabama?

1. Attorney’s Fee

In Alabama, the presence of a real estate attorney at closing is mandated by law. Real estate attorneys draft and prepare all legal paperwork required to transfer the property to the buyer.

Typically, real estate attorney fees in Alabama can range from $150 to $450, depending on the type of home being sold and the type of sale it is.

So, who pays attorney fees at closing? The attorney fee is usually split between the buyer and the seller in Alabama.

2. Credits Towards Closing Costs

You can offer to help buyers with closing costs to make the property more attractive, especially if you live in an area where market competition is low. These costs are called closing credits or seller concessions and are paid at closing.

3. Documentary Transfer Tax

The documentary stamps refer to the excise tax levied on the documentation that transfers the property from you to the buyer. It is like paying tax on a property deed or some other official documentation.

4. Escrow Fee

An escrow is a neutral third party that holds certain funds or the property until the contract conditions have been met. It protects the interest of both parties by ensuring that either does not wrongfully back out of the deal and lose money. Typically, the escrow fee will be split between the buyer and you as both parties benefit from it.

5. Home Inspection Fee

Home Inspections are non-invasive visual examinations of homes. Home inspections can reveal significant defects in the property that a homebuyer may miss.

Alabama home inspection entails identifying any major defects and issues in the house that you must resolve before selling it. These may include plumbing issues, water damage, mold, appliance malfunction, etc. This can be done before the property is listed on the market (pre-inspection) or just before the closing.

Disclosure laws in Alabama follow the rule of ‘caveat emptor,’ i.e. let the buyer beware. As the seller, you are not obligated to inform the buyer about any defects except those that may pose an immediate health risk. However, you must not actively conceal or hide the flaws.

Alabama seller disclosure requires sellers to declare any known issues and defects with the property

The buyer can also undertake a home inspection. However, if they find undisclosed defects, it might give them the upper hand during negotiations, or they may back out of the deal.

» What is a Home Inspection Cost in Alabama: Here’s how much you’ll have to pay for closing costs in Alabama!

6. Home Warranty Fee

A home warranty covers the maintenance cost of the devices and appliances in the house for a limited time period, like, days, months, or years. You may offer a home warranty to make the property more desirable for buyers.

Sellers usually purchase a year-long home warranty for buyers in Alabama. On average, the home warranty fee amounts to $45 per month.

7. Homeowner Association (HOA) Fee/ Document Fee

If you are a part of the Homeowners Association (HOA), you will have to pay the fee due until the closing date and clear the remaining dues, if any. In most cases, you will not be able to close on the house until the dues are paid.

However, if the issue persists and is not resolved before closing, the HOA can place a lien on your house and even initiate foreclosure.

» Foreclosure in Alabama: How to stop foreclosure in California? Here’s a guide.

8. HOA Estoppel Fee

The HOA Estoppel letter is a legally binding document containing details about the financial obligation, like the monthly fee, that the buyer will have to pay after closing. It also offers information about any unresolved dues you may owe.

The HOA Estoppel fee needs to be paid by you as part of the process. It ranges from $200-$500.

9. HOA Transfer Fee

If you are a part of the Homeowners Association, at the time of closing, the ownership of your house needs to be transferred to the buyer in HOA records. HOA transfer fee is a one-time non-negotiable charge that you pay the HOA to update their records.

10. Mortgage Payoff

Mortgage payoff will most likely be one of the biggest items on your list of fees. You’ll have to pay off any remaining balance of the mortgage on your property with the proceeds of your home sale at closing. This includes interest accrued from the last payment to the day of closing and any penalty the lender might charge you for prepayment of the mortgage.

Contact your lender and discuss the requirements to pay off the mortgage to get the overall details of your closing costs. Also, check for the loan documents if there’s any prepayment penalty with your mortgage.

» Mortgage Lender Alabama: Read to know about mortgage lenders in Alabama.

11. Municipal Lien Search

A Municipal Lien Search can help you uncover any unrecorded liens, code violations, permits, taxes, and utility bills, associated with the property. While many sellers forego a municipal lien search, it can complement a title search, especially since it offers additional information about open or expired permits.

An open or expired permit can be a thorn in the side for both you and the buyer, as it can lead to further expenses and delays in the sale. On average, a municipal lien search costs $200.

12. Owner’s Title Insurance Alabama

The title insurance cost is based on the property value and is decided by the state. Primarily, you, the seller, will pay for the owner’s title insurance to protect the buyer against discrepancies relating to the ownership of the property or false documentation. Additionally, title insurance takes care of any back taxes, liens, ownership clauses, etc.

Both parties can negotiate who purchases the owner’s title insurance.

» Who Pays Owner’s Title Insurance in Alabama: Find out who pays owner’s title insurance in Alabama.

13. Property Taxes

Alabama has one of the lowest property tax rates in the U.S.A. On average, counties in Alabama collect 0.33% of a property’s assessed fair market value as annual property tax. The assessed fair market value of homes in Alabama is calculated as 10% of its appraised or market value.

14. Real Estate Commission Fees Alabama

The agent’s commission is the biggest chunk of the cost you need to pay. However, it’s negotiable and typically paid from the proceeds of your house sale. Likewise, don’t forget to contact your agent to negotiate the fees. In total, you are expected to pay the realtor fees Alabama that range from 4% to 6% (listing agent commission + buyer’s agent commission which costs 2% to 3% of the total sales price).

If you want to avoid paying hefty commissions, you can list your property for a flat fee or with no commission at all! Choosing FSBO (For Sale by Owner) and listing your home with a Flat Fee MLS listing service Alabama can help you save more money. What’s more, you have to pay zero commissions if your buyer has no agent.

» How to Sell a House by Owner in Alabama: A Comprehensive Guide

15. Recording Fees

A recording fee is paid to the local government to register the change in ownership of a house or sale of a property in the public record. Additionally, it records mortgages and other liens against the house. Usually, the recording fee in Alabama is split between the seller and the buyer. The recording fee ranges from $75-$100.

16. Settlement Fee/Escrow Fee

Settlement fee is the compensation paid to a settlement agent for their closing services. A settlement agent is a third-party intermediary who helps you and the buyer complete the transaction. They clear the house for sale and transfer the ownership to the buyer and the respective funds to you.

As mentioned above, in Alabama, it is mandatory for an attorney to be a part of the deal closure. Both real estate attorneys and title companies can act as closing or settlement agents in the state.

17. Termite Bond

Termite infestations are pretty common in Alabama, owing to its warm weather. Subsequently, homeowners in Alabama often opt for a “termite bond”, a contract with a pest control company to treat any active termite infestations in the home. It also covers the costs of repairs.

It is standard for home buyers to go for a termite inspection in Alabama. After the inspection, the inspector issues a legal document verifying that the property has been inspected for termites. Many-a-times this is required by the mortgage lender.

If active infection or damage is detected during the inspection, you may have to purchase a new termite bond or transfer your current bond to the buyer. Termite bonds usually cost around $600.

18. Transfer Taxes Alabama

Alabama real estate transfer tax is imposed by the state for the legal transfer of the home from the seller to the new homeowner. In Alabama, the buyer usually pays for this, but they can negotiate this cost with you. The real estate transfer tax rate is $0.50 per $500 of the home’s purchase price.

19. Utility Bills

You must pay all utility bills till the date of purchase of the house. The title company usually checks for unpaid bills and utility liens. If there are any dues, you must clear them at closing.

How to Reduce Seller Closing Costs in Alabama?

1. Opt for a discount broker or a flat fee realtor

As compared to traditional brokers who charge 6% of the sales price as commission, discount real estate brokers in Alabama only charge 3%-4% of the sales price for their services. Some low commission realtors offer higher concessions if you let them represent you as buyer’s agents for your next real estate purchase.

» Largest Mortgage Brokers in Alabama: Read to know about Alabama mortgage brokers.

2. Choose “For Sale By Owner”(FSBO)

Sellers can save up to 3% commission and cut several costs by opting for “For Sale By Owner” services. Houzeo offers Flat Fee MLS packages for FSBO sellers that list properties on the MLS and make the selling process easier and smoother. Additionally, if the buyer is unrepresented, with Houzeo, sellers can sell their homes for zero realtor commission charge!

» Flat Fee MLS: Everything You Need to Know

3. Research and compare

You can save more cash on closing costs for sellers, such as the pest inspector or homeowner’s insurance agent, and title and escrow companies that are more economical. Browse and ask friends who have already experienced hiring one.

4. Ask to roll pay your closing costs into your loan

Your lender may offer to pay the seller closing costs at closing and add it to your mortgage. However, it comes with a price. The lender may charge you a higher interest on the loan, which now also includes the closing cost.

5. Negotiate realtor fees

While traditional real estate agents usually charge 6% of the sale price as commission, this number is not set in stone. You can negotiate the fee with your realtor.

6. Ask the buyer to cover seller closing costs

Buyers may agree to cover closing costs for sellers if the market is competitive and fewer houses are in the market. Alternatively, you can raise the listing price according to closing costs to cover full or partial closing costs.

» How Much are Closing Costs for Buyer in Alabama: Check out what are the buyer closing costs in Alabama.

Closing Costs Calculator Alabama

Closing costs in Alabama vary heavily according to location and mortgage rates. So, how to calculate closing costs in Alabama?

Houzeo’s Closing Costs Estimator is a free tool that factors in these elements to help sellers estimate their closing costs. It shows the user a detailed list of itemized costs and highlights junk costs that can be avoided.

All the seller has to do is enter their property location, home sale price, mortgage payoff, seller agent commission, and buyer agent commission in the Home Sale Calculator and find out how much closing costs they will have to bear.

The Seller Closing Cost Calculator even gives sellers an estimate of their home inspection fee and home warranty fee. With the help of this home sale proceeds calculator, sellers can find out their home equity and be prepared for closing.

Houzeo’s Alabama Closing Costs Calculator is frequently calibrated to give you the closest estimate according to market conditions.

» Calculate Seller Closing Costs in Alabama: Check out the seller closing costs calculator for calculating the closing costs for the seller.

How Should I Prepare for My Alabama Home Closing?

Your closing agent will set a date for your closing after consulting wth you. To get you ahead of what to do, here’s a simple guide to prepare for your closing day.

1. Always Review Your Closing Documents in Advance

It is important to examine and check these documents at length and understand the provisions involved. To get you familiar with these essential papers, there are some key documents you’ll likely sign at closing.

The HUD-1 or Closing Disclosure

If your home is purchased with a mortgage, then you’ll get the Closing Disclosure summarizing the costs in detail. However, if your transaction is all cash, you may get the HUD-1, although this is usually rare. These documents detail amounts you’re being charged for, your loan pay offs, if any, and the net proceeds you will take to the bank. Remember, depending up on how much equity you have in the property, you might be asked to bring a check (or send a wire) on the closing date.

Review the paper and make sure there are no typos in your name, bank info, address, property address, and other important details. Subsequently, check every amount and total so there are no lapses on the costs. You’ll be surprised how many times these documents have errors—this is one of the reasons our founder launched Houzeo.

The Deed

This document enables the legal transfer of title from the seller to the buyer. The transfer tax rate is $0.50 per $500 (0.1%) of the purchase price, which means the amount depends on the price of your home sale. Your real estate attorney will help you prepare these legal documents. It’s important to read and review these documents carefully, verifying the details.

Check the deed book, the legal description of the property, deed book page, and the Property Identification Number (PIN), if any. We know of a case where a Seller sold a $94,000 property, but the deed also legally transferred the Seller’s five other homes worth $680,000 over to the Buyer. There was a huge scramble post-closing to correct this mistake. It could have been a nightmare for the Seller if the Buyer didn’t honestly transfer the rest of the properties back to the Seller.

2. Ask Questions When in Doubt

If this is your first time selling a house in Alabama, set an appointment with your closing agent or real estate attorney to review the documents and talk about what you don’t understand before the scheduled closing date,. You can also do your research and get familiar with the state provisions and regulations.

3. Bring TWO Forms of Official ID

Since there will likely be a licensed notary involved in the process, you have to bring valid identification like driver’s license or passport. Also, carry a secondary ID as well for backup documents. Remember to bring the security codes, garage keys, and other devices to open the house or other rooms. 


Developing an understanding of the cost of selling your own home in Alabama is important for you as it can greatly impact your profits. Additionally, Alabama closing costs are an important factor in calculating the listing price of your house.

If you have not begun your real estate journey yet, opt for Houzeo., a tech company, provides an unbeatable combination of maximum savings, cutting-edge technology, and 5-star customer support. With its 100% virtual service, it helps home sellers list their properties without any hassle from the comfort of their homes, while also allowing home buyers to explore properties and make offers online. Houzeo’s customer-centric approach, advanced technology, and flat fee packages make it an ideal choice for those looking to avoid paying high commissions and closing costs in Alabama.

Note: The blog article is informational and should not be deemed as legal advice. Houzeo and its bloggers are not attorneys. For any questions and legal advice, consult a licensed attorney.

» How to Sell My House Fast in Alabama: Discover Best Ways to Sell Your House Quickly

Frequently Asked Questions

1. When are property taxes due in Alabama?

Property taxes in Alabama are due October 1, and are delinquent after December 31.

2. Who can prepare a deed in Alabama?

Local attorneys can prepare a property deed in Alabama.

3. How is closing cost for sellers calculated?

Closing costs are a sum of specific settlement expenses. These vary according to the location, mortgage rates, and market conditions. Houzeo's closing cost estimator is a free tool you can use to get a close estimate of your seller settlement costs.

4. Who pays for title insurance in Alabama, the buyer or the seller?

Usually, the seller pays for the owner's title insurance in Alabama. However, you can negotiate this cost with the buyer. If the buyer has opted for a mortgage, they will pay for the lender's title insurance. Click on this link for more information on who pays owner's title insurance in Alabama.
Want to know what title insurance covers in Alabama? Or what is the cost of title insurance in AL?

5. Are seller closing costs in Alabama tax deductible?

Yes. You can claim tax deductions on some closing costs that are considered taxes or insurance.

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