For Sale By Owner Closing costs range from around 2% to 5% of the total sale price of the home. Most home sellers seek to save on the listing agent’s commission in For Sale By Owner deals. Home sellers save 2%-3% on the listing agent’s commission through FSBO. But, home sellers have to cover costs other than FSBO closing costs.
What are For Sale By Owner Closing Costs?
Closing costs are the over and above costs incurred on the total home sale amount. These FSBO closing costs include a long list of items such as marketing costs, fees, taxes, etc. For Sale By Owner closing costs vary for both the home buyer and the seller.
FSBO Closing costs form an important and negotiable part of the real estate transaction. Real estate websites like Houzeo provide a closing costs calculator to help buyers and sellers with an approximate closing cost.
How Do I Calculate Closing Costs?
For Sale By Owner Closing costs depend on a number of variables. This includes the sale price, the location of the property, the mortgage balance, and the down payment. The house sale closing cost calculator aids in estimating the closing costs for both buying and selling a home.
Seller’s Closing Costs
Selling closing costs can be a little overwhelming – especially if you’re a first-time seller. An important thing to note is that the seller needs to pay both the listing and the buyer’s agent’s commission.
» Seller Closing Costs: Learn in detail about the seller’s closing costs.
Inclusions in Home Seller’s Closing Costs
| Sr. No. | Seller's Closing Costs | Description |
|---|---|---|
| 1. | Seller’s Agent Commission | 2%-3% commission to the seller's agent (only for traditional agents. FFM services like Houzeo do not charge seller agent commission). |
| 2. | Buyer's Agent Commission | 2%–3% commission to the buyer's agent from the total home sale proceeds. |
| 3. | Home Inspection Fee | A home inspection is done to detect any major defects in the house. The average home inspection fee ranges from $200 to $500. |
| 4. | Home Warranty Fee | The home warranty fee covers the expense of maintaining the fixtures and appliances in a home. This is based on a time limit, i.e., days, months, or years. A one-year home warranty might cost around $500. |
| 5. | Property Tax | The value of the property tax is dependent on the price of the property. It is paid annually or at the time of a home sale. 1.1% of the value of the home is the effective tax rate in the USA. |
| 6. | Utility Bills | The owner must pay off all past-due utility bills before selling the home. For example, electricity, water, gas, etc. |
| 7. | HOA Fees | If your house is part of a Homeowners' Association, you will be responsible for paying the dues based on your closing date. You have to pay the due HOA fees which could be annual or monthly or as decided by the association. Your net proceeds will be reduced if you owe fees at closing. |
| 8. | Settlement Fee | A settlement fee is a cost that the seller incurs against the settlement agent. The average settlement cost ranges from $350-$600 (this varies by state). |
| 9. | Attorney's Fee | You must retain a closing real estate attorney as part of the selling procedure in some states. The average attorney's fee ranges from $400 to $700. |
| 10. | Municipal Lien Search | A municipal lien search can help overcome errors made during the title search. The municipal lien search can be undertaken by the title agent. Municipal lien search fees are around $200. |
| 11. | Documentary Stamps | At a home sale, documentary stamps act as a tax on a property deed to transfer the property. The amount of tax is either fixed or based on the sale value. |
| 12. | Title Insurance Premium | If there is a dispute over the title of the property, title insurance safeguards the buyer. At closing, sellers pay a one-time fee for the new owner's title insurance. Title insurance costs range from $300 to $1,500. ▶️Title Insurance: Watch our detailed video on Title Insurance. |
| 13. | HOA Estoppel Fee | The title agent can request an HOA Estoppel letter from the HOA board to verify any dues payable to the HOA. Obtaining this letter costs from $200 to $500, which the seller pays. |
| 14. | Transfer Tax | A real estate transfer tax is imposed when a property is transferred from one person to another. The state, county, or city levies these taxes. Some states impose transfer taxes, others do not. |
Home Seller’s Closing Costs Calculator
Houzeo’s closing cost calculator determines all the closing costs as far as selling a house is concerned. The closing cost estimator for the seller provides close enough values when compared with actual closing costs. All the region-specific data is pre-fed into the calculator to provide near-actual results.
» Closing Cost Calculator: Houzeo’s Advanced Closing Cost Calculator helps with the estimate of your selling cost.
Buyer’s Closing Costs
Buyers must pay their own closing expenses when purchasing a home, just like sellers do. The estimated closing expenses for a buyer can range from 3% to 5% of the loan amount. These costs include title policies, inspections, escrow fees, and various other fees that lenders typically charge.
» Buyer Closing Costs: Learn in detail about the buyer’s closing costs.
Inclusions in Home Buyer’s Closing Costs
| Sr. No. | Buyer's Closing Costs | Description |
|---|---|---|
| 1. | Origination Fee | The origination fee is the sum the buyer pays the lender to cover all overhead costs associated with processing the loan or mortgage. The origination charge for loans varies from 0.5%-1% of the loan amount. There can be regional variations in the fee. |
| 2. | Points Credit/Charge | The term "points" means the discount points, which lower the interest rate in exchange for a one-time payment. The loan amount is being used to generate points. Typically, they account for 0.25% of the loan balance. |
| 3. | Appraisal Fee | To get the home's fair market value using comparable properties, or "comps," FSBO sellers approach an appraiser. The average appraisal cost ranges from $375-$450. |
| 4. | Credit Report Fee | The credit report provides a summary of the buyer's history, information on loans, credit cards, and whether the buyer pays their bills on time. The buyer's credit report charge shouldn't exceed $30. |
| 5. | Flood Certification Fee | To apply for flood insurance, lenders may require an elevation certification which is provided by FEMA. This certificate can help you obtain flood insurance for a lesser rate if your house falls within a high flood risk area. Flood Certification can cost about $15 to $20. |
| 6. | Home Inspection Fee | Usually, the lender hires a home inspector to evaluate the state of the property. The cost of the inspection falls on the buyer. The cost of a home inspection might range from $100 to $150. |
| 7. | Survey Fee | The buyer or lender hires a survey company to identify the boundaries and dimensions of the property. The company also provides the structure of the house and easements. The average survey fee is around $500. |
| 8. | Title Search and Lenders' Title Insurance | The title company often manages the property's title and has full access to the ownership record. To protect the lender and the buyer from title disputes, the lender's title insurance and home title search are necessary. The cost of a title search ranges from $75 to $200. |
| 9. | Postage/Courier | To carry and deliver the documents, postage and courier services cost up to $60. |
| 10. | Attorney, Closing, and Settlement Fees | A buyer needs to hire an real estate attorney to handle the paperwork and legal matters. In some states, an attorney might also act as a closing or settlement agent. An attorney might charge you from $500 to $700. |
| 11. | Miscellaneous Required Services | Lenders also offer other multiple services like examination, notary fees, and much more which don't fall into any of the sections. Such services are miscellaneous required services under Houzeo’s closing costs calculator. |
| 12. | Recording Fees | Local authorities charge recording fees for making changes in the public data related to ownership. This can cost $15, it varies from county to county. But it could also cost $60 for the first page and go up by a dollar or two for each subsequent page. |
| 13. | Transfer Tax | Transfer taxes are significant in real estate transactions, although they vary by state. While some states impose transfer taxes, others do not. A buyer is responsible for paying transfer tax. |
| 14. | Pre-paid Homeowner's Insurance Premium | Home buyers can buy insurance to protect their homes from internal or external damages. To keep the policy active, owners have to pay annual or periodical premiums, based on the policy terms. Home buyers can opt to pay the premium at the time of closing, which adds to the closing costs. |
| 15. | Up-Front Mortgage Insurance Premium | Depending on the down payment, the lender may require you to pay mortgage insurance. This is a one-time fee paid to the lender when closing on a Federal Housing Administration (FHA) loan. The premium is 1.75% of the loan amount and is part of Houzeo’s closing costs calculator. |
| 16. | Prepaid Interest Charges for 15 days | The mortgage lender charges a daily interest on your loan from the time you close on the loan to your first monthly payment. This charge is fixed and mentioned in your closing disclosure form. You can opt to pay for 15 days worth of interest in advance at closing, thus adding to your closing costs. |
| 17. | Escrow Homeowner's Insurance (2 months) | Mortgage lenders may require the buyers to allocate the homeowner's insurance premium of 2 months towards escrow. This is mainly to ensure that the buyer's dues are paid even if they run into some financial trouble. |
| 18. | Escrow Property Taxes (3 months) | The government can place liens or foreclose on houses with unpaid property taxes. Lenders thus make sure that the borrowers take care of the property taxes. Tax liens have priority over mortgage liens, and thus the government can take over the property if the taxes are not paid. |
| 19. | Owner's Title Insurance | Once the buyer obtains the title, the owner's title insurance protects them from title controversies. The contractor might sue the homeowner if they don't pay the past due amounts. In these circumstances, the buyer will suffer. Similar to this, the lender's insurance safeguards it in the event of a property dispute. |
How To Figure Out Closing Costs For Buyers?
Houzeo’s closing cost calculator for buyers helps to estimate the approximate closing costs of buying a home. To determine if there are any discrepancies, buyers can compare the closing expenses with the Loan Estimate form.
» Closing Cost Calculator: Houzeo’s Advanced Closing Cost Calculator helps with the estimate of your buying cost.
Who Pays Closing Costs When Selling a House?
The real estate agent’s commission for both parties is to be paid by the FSBO seller at the time of closing. Generally, buyers handle the remaining closing costs. However, if negotiated, then either of the parties could be the For Sale By Owner closing cost payer.
If a buyer submits an offer with conditions and contingencies, this can easily flip who pays for closing costs. For the home buyers to drop the conditions and contingencies, some sellers offer to pay the closing costs.
Closing Costs On A Cash Sale
Cash to close, also known as “funds to close,” is the sum of money needed to complete the home purchase transaction. Cash sale transactions directly take place between the home buyers and sellers. This helps in eliminating the 5%-6% agent commission paid by the seller. There are a few items you’ll need to complete the transaction when purchasing a home, including “cash to close.”
Cash to Close vs Closing Costs
Cash to close and closing costs are two separate terms. Closing costs are the fees you must pay to your mortgage lender in order to finalize your home loan. Contrarily, the term “cash to close” refers to the entire sum, which includes closing expenses, that you will need to bring to your closing to complete your real estate transaction.
How Do You Calculate Closing Costs On Cash Sale?
Your cash-to-close calculation often follows a straightforward formula.
Your down payment plus closing costs, less any seller credits or earnest money you’ve previously paid, make up most of what you need to close on a mortgage.
Don’t forget to include any fees when calculating your closing costs. As a general guideline, you shell out between 2% and 5% of the home’s price in closing costs and cash-to-close.
Cash to Close Fees
| Fees | Description |
|---|---|
| Down payments | The amount you put down on the house that is not included in your loan is called the down payment. |
| Origination Charges | This is the cost of processing your loan through your lender. |
| Taxes | Property taxes are typically prorated, so you only pay your fair portion for the period you have owned the house in the year you purchase it. After that, you'll probably use an escrow account to pay your property taxes. |
| Prepaid Items | Private mortgage insurance costs, hazard insurance premiums, and other assessment costs are examples of prepaid expenses. |
Can I Avoid FSBO Closing Costs?
No, you can’t avoid closing costs while selling a home by owner. Regardless of whether a seller sells their house with or without a real estate agent, they incur 2%-5% closing costs.
Avoiding FSBO closing costs is not an option. Using a closing costs calculator, home sellers and buyers can estimate the costs and plan their finances.
Houzeo‘s Closing Costs Calculator is an advanced tool that helps you estimate closing costs for free. Calculate NOW!
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Frequently Asked Questions
1. Do closing costs include realtor fees for buyer?
No, the seller pays the realtor's fees. Realtor fees are included in the closing costs and are therefore included in the calculator.
2. Who pays for closing costs when selling a house?
Generally, it is said that buyers are the party that handles the closing costs, however, if negotiated, then any of the parties – buyer or seller – could be the closing costs payer.
3. Are closing costs and commission the same thing?
No, Closing costs are not the same as real estate commissions. It is a part of For Sale By Owner Closing Costs.
4. Does the seller pay closing costs?
Yes, the seller pays 8%-10% of the purchase price as closing costs.
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