Congratulations! You’ve made it to the finish line. Closing on a home can be one of the most exciting moments as a seller, but it can also be stressful if you aren’t prepared. This blog will answer all your questions about seller closing costs in Massachusetts and how to calculate and negotiate them.
What are Closing Costs in Massachusetts?
- 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.
- Typically, in Massachusetts, the closing process is managed by attorney.
- Due to different fees and statute requirements, closing costs vary in municipalities and states.
Who Pays Closing Costs in Massachusetts?
Both, the buyer and seller, pay the closing costs.
As a seller, you can negotiate some closing costs with the homebuyer. However, you must pay closing costs like taxes charged by your state or local jurisdiction. They are non-negotiable.
Most real estate agents know who typically pays what for the closing costs in your local area. So, it’s important to seek professional advice. Hiring an experienced real estate agent can help reduce your closing costs.
How Much are Seller Closing Costs in Massachusetts?
The closing cost in Massachusetts for sellers is approximately 8%–10% of the home’s agreement value. This estimated seller closing costs for Massachusetts includes the commission of the listing and buyer’s agent.
Let’s put this in perspective! The typical home value in Massachusetts is $581,095. So, if you are selling a house in Massachusetts, you may have to pay $46,487 to $58,109 as closing costs.
Most of the closing costs for seller in Massachusetts will be deducted from the proceeds you get from the property. As such, you need enough equity to cover some of the expenses.
» Closing Cost Massachusetts: Read all about how much closing costs are paid by sellers and buyers in Massachusetts
What are the Typical Closing Costs for Seller in Massachusetts?
1. Attorney’s Fee
The state of Massachusets mandates the presence of an attorney at closing. Sellers usually hire real estate attorneys to review the sales contract, especially when no real estate brokers are involved or there are any legal issues with the property.
In most cases, the seller and buyer hire different attorneys to represent their best interests. However, if you and the buyer decide to hire the same attorney, the attorney fee will be split.
Typically, the average real estate attorney fees in Massachusetts is $250 per hour. For closing, attorney fees in Massachusetts usually range from $800-$1,100.
2. Credits Towards Closing Costs
You can offer to cover some closing costs Massachusetts for buyer 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.
You can also negotiate concessions with homebuyers if a requirement for repairs arises after the inspection. This may help you save some money on the costs of repair.
3. 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 interests of both parties by ensuring that either does not wrongfully back out of the deal and lose money. Typically, the escrow charges in Massachusetts will be split between the buyer and you as both parties benefit from it.
You should budget between $200 to $500 or more for escrow fee, depending upon the circumstances of their sale.
4. Home Inspection Fee
Disclosure laws in Massachusetts follow the rule of ‘caveat emptor,’ i.e., let the buyer beware. This means that you are not legally 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.
Per law, Massachusetts real estate seller’s disclosures require sellers to declare the presence of lead paint and septic system to the buyer.
You can opt for a home inspection to identify 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. The average cost of a home inspection in Massachusetts is $430.
The buyer can also undertake a home inspection in Massachusetts. However, if they find undisclosed defects, it might give them the upper hand during negotiations, or they may back out of the deal.
» Massachusetts Home Inspection Checklist: Here’s how much this seller closing cots in MA will cost you.
5. 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.
6. 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. The average HOA fees in Massachusetts is $250 per month.
In most cases, you will not be able to close on the house until the dues are paid. If the issue persists and is not resolved before closing, the HOA can place a lien on your house and even initiate foreclosure.
7. HOA Estoppel Fee
The HOA Estoppel letter is a legally binding document containing details about the financial obligations like the monthly or annual 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 in Massachusetts needs to be paid by you as part of the process. It ranges from $200-$500.
8. 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.
9. 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 to see if there’s any prepayment penalty with your mortgage.
10. 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. Even though 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. In Massachusetts, a municipal lien certificate for a residential property costs $50.
11. Owner’s Title Insurance
Primarily, 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. Furthermore, title insurance also takes care of any back taxes, liens, ownership clauses, etc.
Both parties can negotiate who purchases the owner’s title insurance in Massachusetts.
» How to Calculate Title insurance in Massachusetts: Find out title insurance cost in Massachusetts.
12. Property Tax
While there is no set rate, with a statewide average of 1.17%, the property tax in Massachusetts is more than the national average.
You must pay prorated property tax according to the date of purchase at closing.
13. Real Estate Broker Commission
Real estate commission in Massachusetts ranges from 4% to 6% (listing agent commission + buyer’s agent commission which costs 2% to 3% of the total sales price).
The agent’s commission is the biggest chunk of the closing 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.
To put this in perspective, as per the typical home value in Massachusetts of $581,095, you may have to spend $23,243-$34,865 in commission.
If you want to avoid paying hefty commissions, you can list your property for a flat fee or with no commission at all! By choosing FSBO (For Sale by Owner) and listing your home with an MLS Flat Fee Massachusetts plan, you can save more. What’s more, you pay zero realtor commission if your buyer has no agent.
» How to Sell a Home Without a Realtor in Massachusetts: A Comprehensive Guide
14. Recording Fee
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. It also records mortgages and other liens against the house. The recording fee in Massachusetts typically amounts to 0.001% of the sales price.
15. Transfer Tax Massachusetts
Transfer tax is levied to transfer ownership of the house from the seller to the owner. The tax amount is based on the value of the property. It may be imposed by the municipality, county, or state.
In Massachusetts, the basic transfer tax rate is $4.56 per $1000 of property value.
Depending on the negotiations, the transfer tax can be paid by either seller or buyer. In some cases, the tax is split between the parties.
16. 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 Massachusetts?
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 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.
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 seller, such as the pest inspector or homeowner’s insurance agent, title and escrow companies that are more economical. Browse and ask friends who have experience 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 to cover full or partial closing costs.
Seller Closing Costs Calculator Massachusetts
Closing costs vary heavily according to location and mortgage rates. Houzeo’s Closing Costs Estimator is a free tool that factors in these elements to help sellers and buyers estimate their closing costs. It shows the user a detailed list of itemized costs and highlights junk costs that can be avoided.
All the sellers have 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 Massachusetts 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.
» Seller Closing Cost Estimator Massachusetts: Check out the seller closing costs calculator for calculating the closing costs for seller.
How Should I Prepare for My Massachusetts Home Closing?
Your closing agent will schedule a date for your closing. Here’s how to prepare for your closing day.
1. Review Your Closing Documents in Advance
Closing documents should generally be available to you in advance of the scheduled date of closing. Review these documents at length and understand their provisions. Here are some key documents you’ll likely sign at closing:
The HUD-1 or Closing Disclosure
If the buyer is taking out a mortgage to purchase a house in Massachusetts, they will get the closing disclosure summarizing the costs in detail. These documents detail the fee being charged, the seller’s your loan payoffs if any, and the net proceeds the seller will take to the bank.
Remember, depending 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. Ensure there are no typos in your name, address, property address, bank info, and other details. After that, review every amount and the totals to ensure there are no mathematical errors or inadvertent costs. You’ll be surprised how many times these documents have errors.
This document enables the legal transfer of title from the seller to the buyer. Read this document carefully, verifying all details including the legal description of the property, the deed book, the deed book page, and the Property Identification Number (PIN), if any.
In fact, we know of a case where a home seller sold a $94,000 property, but the deed also legally transferred the 5 other homes they owned worth $680,000 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 them.
Statement of Closing Costs
This statement summarizes all the expenses involved in the transaction. This document is easier to understand vs. the HUD-1/Closing Disclosure, but they should tie.
Certificate of Title
This document allows you to state that you have the right to sell the property.
2. Ask Questions
If this is your first time selling a house in Massachusetts, schedule an appointment with the closing agent before the date of the closing. Prior to that appointment do your research and ask clarifying questions on anything you have doubts about.
3. Bring TWO Forms of Official ID
There will likely be a licensed notary involved to verify your identity. Take a valid driver’s license or passport for ID. Carry a secondary ID as well, just in case.
Conclusion: Seller Closing Costs in Massachusetts
Developing an understanding of the cost of selling a house in Massachusetts is important for you as a seller, as it can greatly impact your profits. Consequently, it is an important factor in calculating the listing price of a house in Massachusetts.
Now you’re ready! You might’ve heard horror stories of people being blindsided by high seller closing costs in Massachusetts – but that’s often the result of not preparing and educating themselves ahead of time. If you opt for Houzeo’s Massachusetts Flat Fee MLS listing service, we want you to be one of the most well-informed home sellers out there. Next step, log on to Houzeo.com and list your home for sale by owner. You’ll be in full control of your listing, and save thousands in the process!
Frequently Asked Questions
Are seller closing costs in Massachusetts tax deductible?
Yes. You can claim tax deductions on some closing costs that are considered taxes or insurance.
2. Who pays for title insurance in Massachusetts, the buyer or the seller?
Usually, the seller pays for the owner's title insurance in Massachusetts. 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.
3. How is Massachusetts seller closing costs calculated?
Massachusetts seller 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 sellers can use to get a close estimate of settlement costs.
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