Phew! You’re almost there! Most of the negotiations are done and you just need to sign the papers to hand over the property to a buyer. But just as you are approaching this final step, you are confronted with a long list of seller closing costs in Colorado. You may wonder what these costs are and who needs to pay them.
Closing costs are the final expense before you sell your house and transfer ownership to the buyer. They can appear overwhelming at first but if you become familiar with the different costs involved, it is easier to calculate the total amount.
Key Takeaways
- Closing costs are the last expenses you need to handle before a real estate transaction is complete.
- They don’t include the cost of the property.
- Both seller and buyer need to pay closing costs.
- In Colorado, the closing is usually handled by an escrow agent, attorney, or a title company.
- The closing costs in Colorado will differ from one county to another.
💰 CALCULATE YOUR CLOSING COSTS IN CO
What are Closing Costs in Colorado?
Closing costs are a series of fees, taxes, and charges that people need to pay before a real estate transaction can go through. These costs are mandatory and can differ from one state to another. The closing costs in Colorado are different from the costs in places like New York or Washington. That’s why you need to calculate seller closing costs in Colorado with the local charges in mind.
The median home value in Colorado is $575,013, and the closing costs in the state are some of the highest in the country, currently ranking 15th. Closing costs can be anywhere between 1% to 6% of the total property cost. The total amount includes local taxes, real estate agent commissions, and more.
The estimated Colorado closing costs are around $5,750 to $34,500.
Who Pays Closing Costs in Colorado?
Both buyers and sellers pay different kinds of closing costs in Centennial State. There is some room for negotiation here depending on the market conditions. For example, if it is a buyer’s market, you may want to cover the buyer’s closing costs as an incentive. If it market is more favorable to sellers, you can set a higher price tag to cover the final expenses.
The closing costs are often deducted from proceeds from the sale of the property. You may need to have some funds in hand to pay the various fees and related expenses.
A real estate agent will know exactly what kind of closing costs you need to pay and where you can cut corners. There are ways to save money on the final expenses with some smart negotiations and awareness of related junk costs.
How Much are Closing Costs in Colorado?
The average closing costs in Colorado vary from one county to another. You may need to look at the local laws for any specific expenses. However, in general, the expenses are around 1% to 6% of the total home value. Buyers can expect to pay around 2% while sellers may end up paying 6.50% if real estate agent fees are included.
You can save some money by being an FSBO seller as you won’t need to pay a seller’s agent fee. Typically, the buyer and seller agents together cost around 5%-6% of the total home value. By skipping an agent, you will only need to pay 2.5% to 3% for the buyer agent fee, which is also the seller’s responsibility.
The closing costs include mortgage payoff, home appraisal, attorney fees, property survey, and more! We explore the most common individual expenses in detail.
What Are the Typical Seller Closing Costs in Colorado
1. Attorney’s Fee
The state of Colorado mandates the presence of a lawyer at closing. Real estate attorneys can help review important documents like the Colorado seller’s disclosure and the sales contract. Attorneys can be especially helpful if no real estate brokers are involved or if 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 attorney fee for house closing in Colorado is $140-$500 per hour.
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.
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.
» How Much are Closing Costs For Buyer in CO: Here is a detailed breakdown of closing costs for buyers in Colorado.
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 Colorado 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
You can opt for a Colorado home inspection to identify any major defects and issues in the house. 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. You can choose to repair the defects identified by the home inspector in Colorado.
Colorado seller disclosure requires sellers to declare any known issues and defects with the property that may affect the health and safety of the buyer. Some of these are:
- Structural defects: The buyer must be informed about leaking roofs, loose masonry, foundational cracks, etc.
- Factors that pose health risks: You must disclose the presence of asbestos, lead paint, etc., to the buyer. However, the law in Colorado does not mandate radon testing and identifying the presence of mold.
- Soil problems: You must identify any issues related to the foundation of the home that could potentially render the house inhabitable. This includes underground pits, mines, or other instability.
- Flood risk: You must provide a list of flooding instances and water damage caused by pipe leaks, broken sewer lines, leaking roof, etc.
- Pest infestation: You must also offer a list of any previous or current infestations of termites or other wood-boring insects.
- Utility defects: You must list defects such as malfunctioning heating and air conditioning systems, damaged lighting fixtures, faulty wiring, leaky ventilation systems, etc.
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.
» Home Inspection Cost Colorado: The cost of home inspection varies according to factors like the type, size, and location of the house.
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.
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.
8. 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 Colorado needs to be paid by you as part of the process. It ranges from $200-$500 per month.
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. The 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 to see if there’s any prepayment penalty with your mortgage.
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
There are two types of title insurance in CO, owner’s and lender’s. 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. Title insurance rates in CO depend on the purchase price of the house.
Both parties can negotiate who purchases the owner’s title insurance.
» Is Owner’s Title Insurance Required in Colorado: Read more about this closing cost in CO.
13. Property Tax
While there is no set rate, with a statewide average of 0.99%, the property tax in Colorado is less than the national average.
You must pay prorated property tax according to the date of purchase at closing.
14. Real Estate Broker Commission
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. In total, you are expected to pay the real estate agent commission that ranges from 4% to 6% (listing agent commission + buyer’s agent commission which costs 2% to 3% of the total sales price).
To put this in perspective, as per the typical home value, Colorado state real estate commission may amount to $13,000-$19,500.
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 in Colorado plan can help you save more. What’s more, you pay zero realtor commission if your buyer has no agent.
» Sell a Home Without a Realtor Colorado: A comprehensive guide on how to sell your house yourself.
15. 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. Recording fee is usually charged by the county.
16. Transfer Tax
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.
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.
17. 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 Closing Costs in Colorado?
1. Opt for a discount broker or a flat fee realtor
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 brokers 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 “homes For Sale By Owner Colorado” services. Houzeo offers Colorado Flat Fee MLS packages for FSBO sellers that list properties on the MLS and make the selling process easier and smoother. What’s more, if the buyer is unrepresented, with Houzeo, sellers can sell their homes for zero realtor commission charge!
» For Sale By Owner Sites: Here is our pick of the top FSBO websites for 2023!
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. 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.
» Best Real Estate Brokers in Colorado: Find out who is the best real estate brokers in Colorado for you.
5. Ask the buyer to cover seller closing costs
Buyers may agree to cover closing costs for sellers if the current housing market in Colorado is competitive and fewer houses are in the market. Alternatively, you can raise the listing price to cover full or partial closing costs.
CO Seller Closing Costs Calculator
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 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 Costs Calculator Colorado: Check out the seller closing costs calculator for calculating the closing costs for seller.
How Should I Prepare for My Colorado 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 Colorado, they will get the closing disclosure summarizing the costs in detail. These documents detail the fee being charged, your loan payoffs if any, and the net proceeds you will get from 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.
The Deed
This document enables the legal transfer of the 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 home in Colorado, 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
Developing an understanding of closing costs is important for you as a seller, as it can greatly impact your profits. Additionally, it is an important factor in calculating the listing price of a house in Colorado.
Now you’re ready! You might’ve heard horror stories of people being blindsided by high closing costs in Colorado- but that’s often the result of not preparing and educating themselves ahead of time. If you are a Houzeo For Sale By Owner Seller in Colorado, 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!
» Review of Houzeo: Check out Houzeo.com’s reviews before listing your house!
Frequently Asked Questions
1. How long does it take to record a deed in Colorado?
It takes anywhere between seven to 10 days to record a deed in Colorado.
2. Do I need to pay capital gains tax in Colorado?
Yes, Colorado considers capital gains taxable income and you need to pay 4.55% to the state.
3. How is closing cost for sellers calculated?
Closing costs are calculated by adding up all settlement expenses. These expenses vary from one county to another in Colorado. Houzeo's closing cost estimator is a great tool to help you calculate all of your closing costs.
Also Read
- Who Pays Closing Costs in Colorado: Closing costs in CO vary according to the type of real estate deal. Read more!
- Cash Buyers in Colorado: Companies that buy houses for cash in Colorado ensure fast closings and offer instant cash deals. Who’s the best real estate cash buyer? Read on!
- I Need To Sell My House For Cash: Find out the different ways to sell your house fast for cash.
- How Can I Sell My House Quickly Colorado: There is more than one way to sell your house fast in Colorado. Read on to find out more.
- Selling a House As Is in Colorado: Check out how you can sell your house as is in Colorado.
- How To List on the MLS: List your home on the MLS yourself without hiring a real estate agent.
- CO Purchase And Sale Agreement: Check out how to create a contract for an FSBO transaction in CO.
Additional Resources
- List of Real Estate Companies in Colorado: Here are the top real estate companies in Colorado that can help you with all your real estate needs.
- Best Real Estate Websites Colorado: Find out which are the best real estate websites in Colorado that can help you crack a smooth real estate deal.
- REALTOR Fees in Colorado: There are thousands of REALTORS in Colorado. Check out this blog to find the best one for you.
- Selling Inherited Property in Colorado: Find out the conditions under which you can sell an inherited house in Colorado.
- How to Stop Foreclosure Sale in Colorado: Read on to find out how you can stop your property from going into foreclosure.
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