Seller’s Closing Costs Explained

Seller's Closing Costs Explained

You’ve already found the right real estate agent, gotten your home ready for sale, learned how to safely sell your home during COVID-19, learned how to sell your home in a seller’s market, learned how to choose the best offer on your home during, and negotiated with the buyer.

Now, it’s time to learn what you as the seller will be expected to pay in closing costs.

What are closing costs?

At closing, the sale of your home will be final, ownership will officially be transferred to the buyer, and both the buyer and seller will settle any unpaid costs — called closing costs. Buyer’s costs are generally related to their mortgage — like origination points, escrow, and an appraisal for the lender.

Sellers usually pay about 1% to 3% of the home’s sale price — plus 3% to 6% in agent commissions — and might include taxes, unpaid bills, or loans. But, other amounts paid to transfer ownership legally are usually split between buyer and seller. You can find all these fees on your HUD statement provided by your title company shortly before your closing date.

Title search and title insurance

A title search is always done to ensure the new owner has clear title, without any outstanding liens or mortgages on the property. A title company handles all the research, and the buyer typically pays this cost or it is split between the buyer and seller.

In addition to a title search, title insurance is also purchased from the title company. The seller typically pays for the owner’s title insurance, which is a percentage of the purchase price set by the local municipality or state. On the other hand, the buyer pays the lender’s title insurance to the mortgage lender, which is a percentage of the amount borrowed. Both policies cover the owner or lender against future claims on the title.

Mortgage payoff

If you have a mortgage on your home, you’ll need to pay it off with the proceeds of the sale at closing. And while it’s rare, you may also owe a prepayment penalty if you’re paying it off early, depending on your loan terms. If the proceeds of your home are less than your current balance owed, you’ll need to bring additional money to closing to cover the difference and fully pay off the bank.

Outstanding amounts owed

Since there are likely some bills for your home that won’t arrive before the new buyers take ownership, these amounts will be included in your closing costs. Usually these include utility bills, insurance, HOA dues, or property taxes paid in arrears and are prorated to the date you hand over your keys.

Transfer taxes

As they say, nothing is certain but death and taxes. When you sell your home, you’ll pay transfer taxes — which might also be referred to as recordation taxes, stamp taxes, or grantee taxes. Transfer taxes are generally split 50/50 between the seller and buyer, vary by state, and are a percentage of the purchase price.


While costs for repairs either prior to listing your home or as a result of the buyer’s home inspection aren’t usually included in closing costs, you’ll want to make sure to plan for them.

You’ll likely pay at least a couple thousand dollars in this category.

Real estate agent commissions

In most areas of the U.S., it is customary for the seller to pay commissions for both the listing agent and buyer’s agent. Total commissions land right around 5% to 6% of the purchase price, split evenly between the listing and buyer’s agents.

Should you pay the buyer’s closing costs?

In a seller’s market — like right now — you likely don’t need to offer to pay any of the buyer’s closing costs in order to close the deal. In fact, you may be able to have your pick of terms from multiple offers, as there are more buyers currently than inventory. There shouldn’t be much reason to make these concessions, but rely on your real estate agent’s expertise.

In a buyer’s market, offering to pay some of the buyer’s closing costs in exchange for a higher offer may keep your payout the same. You may do this if a buyer doesn’t have the upfront cash to cover their closing costs and would like to lump those costs into their mortgage. Be careful, though — some mortgages limit how much assistance a seller can provide. Plus, the lender’s appraisal must support the higher sales price.

Don’t forget about these costs of selling your home

Make sure to factor in the costs of selling your home — not only closing costs, but also things such as renting a storage unit, staging, and the costs of moving. Preparing yourself for these costs in advance will make the process much less stressful and you’ll be settled into your new home in no time!