Once you have determined a fair market price for your home, you can calculate your bottom line. This is the amount that you will net (get a check for) after paying all of the expenses associated with selling a home.
Closing costs vary from area to area and also depend on how each individual contract is structured. The following are items that you may need to deduct from your sales price to determine your net proceeds:
MORTGAGES OR LOANS - Any first, second, etc. loans, or mortgages. Also any liens that occurred if you used your home as collateral. Call or write your lender and ask for the amount to pay the loan in full (often not the same as the principal balance).
LOAN DISCOUNT POINTS – In many areas it is customary for the seller to pay points on the buyers loan. This is negotiable, except on certain government loans. One point is equal to one percent of the loan amount (not sales price). For example, if the sales price was $175,000, and the buyer put a 10% down payment of $17,500, the loan amount would be $157,500. One discount point would be $1,575, two points $3,150, etc.
PRORATED INTEREST – Mortgage interest is generally charged in arrears. This means that when you make your July payment, you are actually paying interest for June. So if your home sale closes on July 26th , you will still owe interest for 26 days even though you already made your payment on July 1st.
BUYERS CLOSING COSTS – Many buyers will ask the seller to pay part or all of their closing costs. On some government loans it is required by law that the seller pay them. These costs can include, but are not limited to: loan application fees, credit report, loan origination fee (usually 1% of the loan amount), loan discount points, title, escrow, and attorney’s fees, funding fees, tax service, mortgage insurance premiums, and impounds for taxes, insurance, and interest.
ATTORNEY FEES – Everyone loves lawyers!
APPRAISAL FEES – If the buyer is obtaining new financing for the purchase, the lender will require a professional appraisal on the house. This is another negotiable item, but is often paid by the buyer in our area.
TERMITE INSPECTIONS – Required on most loans, and requested by many buyers. In our area, it is customary for the seller to pay for the termite letter.
STRUCTURAL/GENERAL INSPECTIONS – Professional independent inspection services are required by law in some areas and often requested by buyers to make them more confident about the purchase. In our area the buyer usually pays for the inspection.
TITLE INSURANCE FEES – Title insurance protects the buyer and lender against issues of improper ownership or transfer. The title insurance company will research the title to make sure there are no liens, judgments, or clouds on the title that would effect the ownership rights. Often this is included in the attorney's fees.
HOMEOWNER ASSOCIATION FEES – If the area has a HOA, chances are that there will be a fee to transfer from one owner to the next. You may receive a credit.
PREPAYMENT PENALTIES – Many private and some conventional loans have specific monetary penalties if the loan is paid off prior to a certain date.
RECONVEYANCE FEES – This fee may be charged by an attorney or escrow company to clear off the lien on the title when your existing loan is paid off at closing.
FAILURE TO NOTIFY PENALTIES – Some government lenders can charge one extra months interest if you fail to notify them at least 30 days in advance of your intent to pay off the loan.
ASSUMPTION FEES – Loans that are being assumed by the buyer often have an assumption fee charged by the lender. Most lenders do not allow loans to be assumed.
HOME WARRANTY COVERAGE –Depending on the plan, a home warranty covers items in the house (plumbing, electrical, appliances, etc.) for a period of usually one year. Usually paid for by the seller.
For a list of specific charges, you can contact a real estate attorney. Of course, I would be happy to provide you with a net proceeds analysis at no cost or obligation. |
