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16 min read Jan 23, 2023

What Are the Sellers Closing Costs in Michigan?

Sellers Closing Costs in Michigan

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 costs in Michigan can be overwhelming and exhausting. However, familiarizing yourself with the process and the various fees 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 Michigan, the closing process is can be carried out by an escrow company, a title agency, the lender or an attorney.
  • Due to different fees and statute requirements, closing costs vary in municipalities in Michigan.

  • đź’° CALCULATE YOUR CLOSING COSTS IN MI

What are Closing Costs in Michigan?

Michigan closing costs are a set of expenses that the seller and the buyer must pay 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.

Who Pays Closing Costs in Michigan?

Both the seller and buyer pay the closing costs in Michigan. Although the buyer has to pay more fees as closing expenses, a seller has to pay a higher amount as closing costs. However, sellers need not wonder about how much is an appraisal in Michigan because buyers are the ones usually responsible for costs like appraisal fees, title insurance, and mortgage fees.

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

Michigan real estate brokers know who typically pays which closing costs in Michigan. So, it’s important to seek professional advice. Hiring an experienced agent can help lower seller closing costs in Michigan. Remember, some of the fees are negotiable, which your agent can discuss with you.

» Estimate Seller Closing Costs Calculator Michigan: Calculate seller closing costs using Houzeo’s advanced Closing Cost Calculator

How Much are Closing Costs in Michigan?

When you sell your home in Michigan, the estimated closing costs for sellers could reach up to 8% to 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 typical closing costs in Michigan for sellers!

What Are the Typical Closing Costs for Sellers in Michigan?

1. Attorney’s Fee

The law in Michigan does not mandate the presence of a real estate attorney for a real estate transaction. Sellers usually hire real estate attorneys in Michigan to review the sales contract, especially when no real estate brokers are involved or there are any legal issues with the property. However, you can hire a real estate attorney even if your case is not unusual.

So, who pays attorney fees at closing? 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, real estate attorney fees in Michigan can range from $150 to $350, depending on the type of home being sold and the type of sale it is.

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.

» How Much are Closing Costs for Buyer in Michigan: Find out more about the typical buyer closing costs in Michigan before deciding on seller credits.

3. Documentary Stamp

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

The seller disclosure in Michigan makes it obligatory for you to inform the buyer about the structural condition fo the property as well as amenities.

You can opt for a home inspection to identify any major defects and issues, like plumbing issues, water damage, mold, appliance malfunction, etc., in the house. This can be done before the property is listed on the market (pre-inspection) or just before the closing.

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.

» How Much Does a Home Inspection Cost in Michigan: Is it worth it?

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 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.

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

So, what is the cost of title insurance in MI? It’s 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 for Owner’s Title Insurance in Michigan: Read further to know more about owner’s title insurance in Michigan.

13. Property Taxes

The effective property tax rate in Michigan is 1.64% of the assessed property value. These rates vary across counties.

Property tax can be paid annually or at the time of the real estate transaction. You must pay prorated property tax according to the date of purchase at closing.

14. Real Estate Commission Michigan

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 Michigan real estate agent commission rate ranges 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 MI FSBO (For Sale by Owner) and listing your home with the best Flat Fee MLS companies in Michigan can help you save more money. What’s more, you have to pay zero commissions if your buyer has no agent.

» Discount Real Estate Brokers MichiganThe best of both worlds! Opt for full-service discount realtors in Michigan at a lower commission.

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. It also records mortgages and other liens against the house. Usually, the state recording fee in the state of Michigan is paid by the seller. However, you can negotiate it with the buyer.

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.

In Michigan, the settlement agent can be an escrow company, a title agency, the lender or an attorney

17. Transfer Tax

Transfer tax is levied to transfer ownership of the house from the seller to the owner. The seller pays transfer tax in Michigan.

The tax amount is based on the value of the property. The state transfer tax in Michigan amounts to $3.75 for every $500 of value. In addition to this, teh seller has to pay county transfer tax. The rate of county transfer tax in Michigan varies across different regions. On average, it costs $0.55 for every $500 of value.

18. 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.

Closing Costs Calculator Michigan

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

Houzeo’s Closing Costs Calculator MI 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.

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

» Estimate Seller Closing Costs Calculator Michigan: Check your closing costs now!

How Should I Prepare for My Michigan Home Closing?

Typically, your closing agent will schedule a date for your closing after consulting with you. They will also speak with third parties like HOA, Michigan home inspector, and buyer agents. Here’s who to prepare for your closing day.

1. Review Your Closing Documents in Advance 

It is important to prepare all your closing documents and forms before the scheduled closing date. Review the document thoroughly and understand the provisions and regulations stated. Here are some crucial documents that you’ll likely sign during closing.

  • The HUD-1 or Closing Disclosure: If your property is purchased with a mortgage, you’ll need to get a closing disclosure that summarizes the costs in detail. But if your transaction is all cash, you need to get the HUD-1 (though it’s rare to this day). These documents detail amounts you’re being charged for (all fees including taxes, insurance, escrows, credits, etc.)

Remember, depending upon 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. Then 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 is one of the reasons our founder launched Houzeo.

» Michigan Sellers Disclosure NoticeTake an in-depth look at the seller disclosure requirements in Michigan.

  • The Deed: (Average deed preparation costs between $150 to $200) 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, 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 over the Seller’s 5 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

Make sure you secure an appointment with your closing agent before the closing date. Review and ask questions in details of your doubts and other matters that needed to be addressed. And also, you can contact your real estate attorney for legal advice.

3. Bring TWO Forms of Official ID

There will likely be a licensed notary involved who’ll require that you swear you are who you say you are. Take a valid driver’s license or passport for ID. Carry a secondary ID as well, just in case. Here’s a quick list of what you need to bring during closing:

  • Government-issued photo identification of all sellers on the home contract
  • Any questions you have regarding your closing statement
  • The deed of your home if you own it outright
  • Access information, main keys and security codes for your home
  • Documentation of repairs you’ve made per the home inspection
  • Your lucky pen

Conclusion

Developing an understanding of how to sell your home in Michigan is important for you as it can greatly impact your profits. Additionally, the closing cost percentage in Michigan is 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, that 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 Michigan.

Note: This is only a quick guide for all the sellers in Michigan. Despite most information readily available online, seeking expert advice helps progress the process of selling a home.

Frequently Asked Questions

1. Who pays for title insurance in Michigan?

Usually, the seller pays for the owner's title insurance in Michigan. If the buyer has taken a mortgage to purchase the house, they pay for lender's title insurance.

2. Do you pay capital gains tax in Michigan?

Yes. The capital gains tax rate in Michigan is 3.8%.

3. How is closing cost for sellers in Michigan 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 settlement costs.

Selling a House in Michigan: Everything You Need to Know

Additional Resources

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