It's Not Just Commission. What Are All The Costs?
I hate the term "fine print". So much so, that I really wish they would just include the tax in the price on the tag. I am sure I am not alone in wanting to know what something will cost, not what it cost plus some add ons. So if you are like me, and you're thinking of selling your home, then this post is for you. Below I outlined all of the possible fees that could be associated with selling your home. If you are thinking selling your home and make the horrible decision not to use us, or if you are in a market that we don't serve, make sure to ask for a Sellers Net. This is a form that we use to show all of the fees that we can guesstimate when we first list your home.
You understand commission? Tired of hearing about it? Me too. Instead of writing another book report about it. Here is another blogpost dedicated to all the awesomeness of commission.
2. Deed Stamps.
Ah the ole deed stamps aka transfer tax. Deed stamps actually sound better, but at the end of the day it's a tax the county charges to transfer the deed out of the current owners name and into the new owners name. In our market the county charges $3.70 per $1,000 of the sales price. So thats $370 for a $100k house sale.
So we are talking about this fee in terms of what Sellers are responsible to pay. However, this is not a mandatory "Seller Fee", it's actually negotiable, but in most markets the contracts include that they sellers pay it. Builders on the other hand love to offer to pay this fee, as long as you use their preferred vendor. So make sure if you are buying new construction you know who's paying for the deed stamps.
Nerd alert: I love history so I thought I'd share this with you. These use to actually be stamps, so when you would go to record your new deed at the county Register of Deeds, they would pull off these stamps, lick it, and attach it like you were mailing something. They did this along the top as many times as they had to, to make the math equal. As with technology, they got rid of that practice and now use automated machines. Not as cool, but much more efficient.
3. Attorney Fees.
Since we are an "attorney state", meaning you have to use an Attorney to close your home, you have to pay for services rendered. So what services are they rendering for Sellers?
- Deed Preparation: To make the transfer of the house legit, you need to prepare a deed. This is where you formally give your ownership interest to the buyer. Of course you are doing it for money, so you have to do it. You don't have to use the same Attorney the buyer is using, however it tends to be cheaper to since Buyer's Attorney already has all of the information.
- Payoff: To pay off your mortgage you need to know exactly what you owe. There is only one to find that out. To request an "official payoff" from your lender. The Attorney will also do this for you.
- Overnight: Everyday you live in the house cost you money. So as soon as you close on your home, the attorney will overnight your your pay off to the Mortgage Lender to get them to stop charging you money.
- Recording Fees: Once you pay off your mortgage, you need to record a satisfaction at the courthouse showing that. That way you close the loop, as a mortgage was recorded when you bought it.
- Misc Fees: There are some miscellaneous fees when selling like "copies, runner, opening emails, wires" etc. So don't be too surprised by this category.
When you use a loan to buy a home, the majority of the time, the bank will require that you use an escrow account to pay your yearly fees, like Taxes and Insurance. Well since you have owned your home you should know about this, but if you forgot, in essence what happens is every month you pay principal and interest amounts to the bank, and on top of that amount you have to pay 1/12 of your tax bill and 1/12 of your insurance bill. That way when the bills come due, you have the money in the account to pay the bill and not feel like you have to cut some substantial check, that you may or may not have.
Ok, how does this affect you? The day you sell on your home, you have to credit the tax amount for the time you lived in the home that year. For example, your annual tax bill is $2,000 and you sell your home on 6/30. Then you would owe the buyer $1,000 for the 6 months you lived in the house. Then the buyer has to pay the entire tax bill at the end of the year.
But wait, above I told you, that you were putting 1/12 of that $2,000 in an escrow account in anticipation of having to pay the whole bill. So what happens to that $1,000 dollars you have chilling in that escrow account? The mortgage company has to refund it to you with-in 45 days. This is also true for your insurance too.
So to wrap this up, your check a closing may be a little smaller than expected, but you will get back most of that money from your previously lender shortly.
5. Possible Costs.
When we are filling out a sellers net with a client who just listed with us, we don't have a crystal ball. We can only estimate fees that we know are a "must". However, there are other costs that a buyer could ask for as part of the offer. So every time we get an offer, we send a sellers net to the seller showing all of the fees the buyer is requesting. We've outlined a few of the possible costs below.
- Closing Costs - Some buyers ask the seller to pay their closing costs. I think the way we say that is wrong. In essence they are asking to wrap in their costs. You don't have to actually cut a check for their fees. For example: a buyer offers you full price on your $100,000 house, and ask for $3,000 in closing costs. Well what they are actually offering you is $97,000, but they are telling the bank they are paying $100,000 and wrapping repairs in their loan. There are rules around it and this is totally legal, as long as you follow those rules. Cost = 3-6% depending on loan.
- Home Warranty - I explain Home Warranty's as being a health insurance for your home. They cover the major mechanicals of your home, have a premium and a co-pay and say no more than yes. However, they do give the buyer a piece of mind. Which can go a long way when selling a home. Cost = $400-$1,000 depending on ad ons.
- Non Residents Tax - If you are a resident of the great state of South Carolina when you sell your home, move on to the next point. If you are not, South Carolina can and will charge you a 7% withholding tax on your profits. I am not an attorney nor tax person, so get all of the juicy details from them.
- Repairs - Hopefully we know of all the issues that could be. But sometimes buyers include them in the offer if they want to ensure they get done. We don't see these being too much, and there are some many possibilities we don't want to guess.