The Cost of Selling a Home: What Fees Should I Know About?

The Cost of Selling a Home: What Fees Should I Know About?

When selling a home, many sellers do not take in to account the host of fees that are associated – many of which are unavoidable. Here are some of the fees and costs you will need to take into account when you are budgeting for the sale of a house – especially if you are planning to buy a new home with the profits.

Escrow Fees

Escrow is a service that is provided by an organization that is independent of both the buyer, the seller, and their respective agents. The escrow officer has three main roles:

1. Handling the deed and title transfers that make the buyer the new legal owner of the property.
2. Holding onto all of the important and relevant sales documents.
3. Handling the money as it moves from buyer to seller and making sure the money gets to the right place at the right stage of the sale process.

Generally, escrow fees cost between 1-2% of the sale price, however, they can can go higher.

Taxes

Depending on which state you live in selling a property will often involve paying taxes. The most common tax that is involved is a transfer tax. This is usually imposed on the sale itself rather than an individual, meaning it’s up to the buyer and seller to negotiate who pays (or how the cost will be split).

In some cases, you may have to pay capital gains tax on the profit you’ve made on the property that you have sold: this is based on the the sale price minus what you originally paid for the property. While this does not affect most people, as there’s a $250,000 exclusion for an individual or $500,000 for a married couple. This applies as long as the home in question has been your main home for at least one year of the previous five years. This exclusion applies only to the profit, not the sale price, so it’s only usually a factor for expensive homes.

Title Fees

The term Title is a legal term for who is the official owner of a property. As well as the cost of handling the title transfer itself (which is usually part of the service covered by escrow fees), a house sale usually brings about two other title-related fees.

1. A title search is a formal check of public records to confirm the seller is indeed the legal owner of the property and nobody else has any claims or liens on the property. The cost of a title search depends on the state and how difficult it is to access the records.
2. Title insurance covers the potential legal problems and claims if it turns out there was a mistake in the title search. Title insurance requires a one-off payment rather than ongoing premiums, which is usually in between ½ -1% of the property sale price. Miscellaneous Fees

A host of other relatively small fees could arise when you sell a house, which can add up. It’s worth keeping track of such fees and checking if they seem reasonable, but sometimes the negotiation may not be worth the time and stress involved