Simplifying Seller Closing Costs: How Much Do Sellers in Georgia Pay
Simplifying Seller Closing Costs: How Much Do Sellers in Georgia Pay?
Seller closing costs are sometimes overlooked when estimating the profit a property seller would receive from a sale. When, unexpectedly, costs like these are added on at the end of a sale, it might become challenging to know exactly what you, as a seller, are getting.
What is a “Closing Cost”?
During the closing stage of the house-selling process, funds and papers are exchanged in order to give the buyer ownership of the purchased property. The buyer and the seller uphold their end of the bargain in a successful closing.
To clear the title, the seller will pay off all liens against the property, and the buyer and their lender will transfer funds to cover the remaining sum.
An escrow business, a third party that facilitates closing, ensures that all funds, papers, and other items required to finalize the sale are properly exchanged. Closing costs are various fees that both purchasers and sellers pay after a real estate transaction, and they are distinct from agent commissions.
Although sellers usually pay between 1% and 3% of the sale price, the overall costs range from 1% to 7%.
How Much do Home Sellers Generally Pay as Closing Costs in Georgia?
In Georgia, closing expenses are 3.14% of the final sale price of a home on average. In Georgia, real estate commissions are typically the most significant outlay of home seller costs and are also paid at closing. However, this is the one cost where you can easily make savings.
How Do Home Sellers Pay Closing Costs?
Closing costs for sellers are subtracted from the profit you make on the house. But, if you have low equity, you might need to bring cash to the table to pay the fees. Although purchasers have larger expenses during the closing of a home, the seller frequently bears the cost of both brokers’ commissions.
A Detailed Breakdown of Closing Costs for Sellers
1. Real Estate Agent Commissions
The seller typically bears the most significant portion of closing costs is the real estate agent commission. The sellers frequently cover the commission for both the selling agent and the buyer’s agent. With 3% of the home’s selling price going to the agents engaged in the transaction, that often results in a 6% knock to your bottom line.
What can you do to lower this cost?
You could choose the “for sale by owner” route, but you would still be responsible for paying the buyer’s agent. Search for a discount agent, but be careful that they can offer you fewer services in exchange for their low commission.
You can negotiate a lesser commission if you’re selling in a hot market, If your property is precious, or if your listing agent is simultaneously assisting you in finding your next home.
2. Title Insurance
Another closing expense a seller can anticipate paying is the title insurance policy of the lender. A title search is done before a sale to confirm ownership.
In some states, a real estate lawyer must also review the title. If they choose to purchase a policy of their own, the lender and the new homeowner are both protected from unforeseen ownership claims by a title policy.
Although uncommon, an ownership claim may result in court challenges and the hefty legal costs that go along with them.
Can this cost be lowered in any way?
Although you can’t reduce the cost of title insurance, the potential hassle it could save you makes the expense worthwhile.
3. Fees and Taxes
The amount of filing, recording, or transfer taxes may be negotiated as to who pays what price, but the state or local government sets the exact costs in most cases. The seller must pay, many times, the property or deed transfer tax.
Unless you, as the seller, agree to pay them, the buyer will probably share property taxes and homeowner association dues. Usually, these are calculated depending on the closing date. The buyer would pay the bill starting from the closing day as the house’s new owner.
Is there any way to reduce this cost?
Taxes and fees are not negotiable, but if the market is favorable to sellers, you can persuade a buyer to cover more of the fees.
However, since local laws may define who is responsible for paying them, you probably will only be able to avoid them if the government determines that the seller is responsible for paying those.
4. Concessions
You can offer to pay a part of the closing costs in a buyer’s market or simply to help the deal go through. The phrase “seller concession,” “seller contribution,” or “seller credit” all refer to the same thing. A typical seller concession is to agree to pay for any necessary home repairs discovered during the home inspection.
If your buyer isn’t making a cash purchase, the total amount of seller concessions can be constrained by the mortgage they’re taking out. The maximum seller concessions for a conventional loan for a single-family residence that will serve as the borrower’s principal residence range from 3% to 9%, depending on the buyer’s down payment and the availability of other sources of closing cost assistance. Seller concessions are subject to restrictions on loans backed by governmental organizations, such as the Federal Housing Administration.
5. Other Costs You Might Have to Pay as a Home Seller
It’s vital to remember that unless you own your house thoroughly, a sizeable portion of your gains will likely go toward paying off your current mortgage, even though it’s not a closing fee. If you pay the mortgage early, you can be charged a fee.
If there is a prepayment penalty, check your mortgage paperwork. You’ll have to settle any liens or judgments against the property before you can sell it. The title search may reveal information about them.
Before you may sell your house, any second mortgage, such as home equity loans or lines of credit, must be fully repaid. Remember that prepayment penalties may also apply to these. You cannot continue borrowing if the property is no longer owned because its loans are secured.
Negotiate
Closing costs are a negotiating point in a real estate deal, just like anything else. If you’re in a strong seller’s market, you have a lot of negotiating power, and bidders who have lost out in previous bidding wars can be amenable to your demands.
Though you’ll be constrained by how much cash the buyer has on hand, you might negotiate for them to pay part or all of your closing costs. Furthermore, requesting too much could cause resentment or even endanger the transaction.
The greatest thing you can do if you’re thinking about trying to bargain your closing expenses with the buyer is to hire a seasoned real estate agent to represent you.
There is almost always a primary objective when selling your house. The net proceeds must depend on how much is required to pay off the existing mortgage, settle further HELOC debt, pay your agent’s closing charges, and have enough left to purchase another home.
Buyers aren’t concerned with how much money you need to make, but you must be, and setting a fair price may or may not help you reach your objective.
Offer to help with closing costs if you need leverage to convince a buyer and you’re in the thick of a buyer’s market. Most lenders permit the seller to cover up to 6% of the buyer’s closing fees. Your net profit from the sale will be lessened, but those expenses are tax deductible.
How to Handle Your Debt
All debt associated with the property is typically paid in full at closing when it sells. Mortgages are usually paid off first when you sell your property if you have any. Any tax liens or student loan liens are paid off when you finally sell your house.
Escrow is used to pay off debts backed by your property, including equity lines of credit and even construction liens. Unsecured debts are not based on any of your assets. Credit card debt is a common unsecured debt typically not settled when a property sells.
However, if you receive a judgment from an unsecured creditor, the title to your property may become encumbered, and the payment may be deducted from your closing proceeds. Thus, it is prudent tosettle your debts as early as possible.
Taxes and Municipal Debts
All government-related debt, including outstanding property taxes and unpaid municipal services like water and sewerage, is settled when a residence is sold. Most of the time, the seller must provide proof that all utility bills, including the electric bill, have been paid before the sale of their house may close.
Special Assessments
As closing draws closer, special assessments imposed by municipalities or even HOAs start to show up. Property owners typically pay for all of these local special assessments as part of their yearly taxes; however, if the municipality dues still need to be cleared at closing, money must be set aside.
However, property-related municipal special assessments are negotiable and can be settled by either the buyer or the seller.
In addition to being paid at closing, seller closing expenses can significantly increase the debt the seller ultimately repays. Additionally, some owners have discovered hidden secured and unsecured debt, liens, and other issues after selling their property. You might have to pay off debts like old liens and title clouds that might appear on the buyer’s report.
Finally, after obtaining the title, real estate buyers have discovered debt that belonged to prior owners tied to the property; this is when title insurance charges are justified. When a faulty title is found after the title has been transferred, the title company, the buyer and seller, and possibly an attorney must be involved.
A Few More Home Seller Tips
You can compare pricing as your closing date draws near for certain closing charges. Savings may, however, be limited due to the time and effort required, especially during such a hectic period of the home-selling process.
You might need more time to phone a dozen settlement companies to get a $100 discount on title services when you’re already juggling inspections, maintenance requests, and moving preparations. So, below are a few tips to keep in mind in this regard.
Reissuance Rate
Asking the title insurance provider that underwrote your current policy for a reissuance rate can frequently help you save on this seller closing expense if you’re the one responsible for acquiring title insurance and you’ve been the property owner for less than a decade.
Accordingly, the buyer would keep the same title insurance as the seller. Title insurance may be 40% less expensive, thanks to the reissue rate. Although those discounts might sound fantastic, title insurance is already quite affordable.
Even a 40% discount from a normal title insurance package only amounts to 0.06% of the home’s sale price. Nevertheless, that does indeed reduce the title insurance cost.
Escrow Fees
Escrow fees typically equal 1% of the purchase price and are shared equally by the buyer and seller. In the majority of house sales, the buyer selects the escrow company, frequently on the advice of their realtor or lender.
But sellers might look around for a cheap escrow service and recommend it to purchasers. If you discover an escrow firm that offers 20% escrow fee savings, you will save about 0.1% of the home’s purchasing price.
Closing Thoughts on Georgia Seller Costs
Real estate attorneys are both necessary and strongly advised in states where the transaction can be complicated. Working with an attorney who understands your needs perfectly can save hundreds of dollars.
Like you would for any contractor, compare real estate attorneys. Ask your agent, your friends, and your family for recommendations.
Read online reviews to find out what other people thought of a specific attorney’s services. Ask each lawyer how they are paid when you meet with them. How much do they charge, and whether it’s a flat cost or an hourly rate?
