The closing costs associated with selling a home can vary with each sale, so it’s important to understand the variables that may come into play.
The first thing to clarify is that the 3.8 percent tax that will apply to some real estate transactions that goes into effect Jan. 1 will not be an expense that is collected on the day of closing. This potential tax will be calculated as part of the person¹s annual Federal tax return. To receive a brochure explaining this tax, please email info@GCAR.net.
The most common costs associated with a property sale, which are consistent with each transaction, are collected by the closing attorney. A document preparation fee and closing fee to the title company handling the transaction is normal. If there is a mortgage on the property then there will be a fee to overnight the payoff to the lien holder.
The Title Attorney will also collect from the seller a prorated share of the annual property taxes which have accrued as of the day of closing. This is often a point of confusion when an owner has been paying as part of their monthly mortgage payment into an escrow account for the taxes and insurance for the year. The escrowed funds which have been collected through these payments are returned to the seller, once the lien has been paid off and the escrow account closes.
If a seller engages the services of a professional Realtor to represent them in the marketing, selling and negotiation of the sale, then there will be a fee for this service collected at closing. This fee is most commonly calculated as a percent of the sale price, however the terms should always be agreed to in writing prior to beginning the relationship.
While these are all normal seller costs, there is one other type of costs that we should cover that is often negotiated as part of the sales agreement. That is the practice of a buyer asking a seller to assist in
the buyer’s closing costs (the costs associated with procuring a loan, setting up escrow accounts, discount points and prepaid items). This is negotiated into the agreement, whereby a seller gives credit to the buyer at the closing to offset these costs. It has increased in popularity over the last decade to reduce the amount of out of pocket expenses a buyer has on the day of closing.
A member of the Greater Chattanooga Association of Realtors can review each of these costs that may apply in the sale of your property. For more information on the 3.8 percent tax referenced above, email infor@GCAR.net.
Mark Hite is president of the Greater Chattanooga Association of Realtors