Closing costs aren’t just a buyer’s responsibility – sellers have their own expenses to consider as well. On average, sellers can expect to pay between 6% to 10% of the sale price in closing costs, including agent commissions, transfer taxes, and title fees. These expenses add up quickly and vary widely by location. For instance, selling a home in San Francisco, CA, comes with higher transfer taxes than in Phoenix, AZ, where no such tax applies. Understanding closing costs for sellers can help homeowners budget effectively, plan ahead, and avoid last-minute surprises at closing.
What are closing costs for sellers?
Closing costs are the fees and expenses required to finalize the sale of a home. They cover everything from real estate agent commissions to title insurance, escrow fees, and transfer taxes. Most of the closing costs for sellers are typically deducted from the proceeds at closing, meaning you won’t need to pay upfront. However, there are some costs associated with selling your home, like repairs, staging, and pre-listing inspections, that may also need to be paid before closing.
How much are closing costs for sellers?
On average, sellers typically pay between 6% and 10% of the home’s sale price in total closing costs. This percentage includes real estate agent commissions, title insurance, escrow fees, and potential seller concessions. However, the exact amount depends on several factors, including location, property type, and negotiated terms.
Here’s a general estimate of different seller closing costs:
| Expense | Typical Cost | Who Pays? |
| Real estate commission | 3%–6% of sale price | Negotiable |
| Title fees | 0.5%–1% of sale price | Varies by state |
| Transfer taxes | 0%–2.5% of sale price | Seller |
| Escrow and closing fees | $500–$2,500 | Usually split |
| Prorated property taxes | Varies | Seller |
| HOA fees (if applicable) | $200–$1,500+ | Seller |
| Seller concessions (if negotiated) | 1%–3% of sale price | Seller |
Breakdown of closing costs for sellers
1. Real estate agent commission
One of the biggest closing costs for home sellers is the real estate agent commission, typically ranging from 3% to 6% of the sale price. Traditionally, sellers covered the full commission, paying both their listing agent and the buyer’s agent.
However, with recent changes in commission structures, sellers now have more flexibility in how these fees are handled. Sellers still negotiate their commission directly with their listing agent, which typically falls between 2.5% and 3%. Sellers are no longer expected to pay the buyer’s agent’s commission, but buyers may ask them to contribute to this fee as part of their offer, similar to how price or closing costs are negotiated.
In competitive markets, offering to cover some or all of the buyer’s agent’s fee may help attract more buyers. Ultimately, sellers should weigh this decision carefully when evaluating offers and negotiating the sale.
2. Transfer taxes and local fees
In some states, counties, and municipalities, sellers must pay transfer taxes, which are calculated as a percentage of the sale price or the property’s value. These taxes can vary widely depending on location. For instance, some areas may charge 0.5% to 2% of the sale price as a transfer tax, while other regions might have a flat fee or no tax at all.
For example, if you’re selling a home in Providence, RI you may need to pay a transfer tax, whereas selling a home in Austin, TX wouldn’t come with this additional cost since Texas does not impose a transfer tax.
In addition to transfer taxes, there may be other local fees, such as certification or inspection fees, required by local governments before the property can be officially sold. These costs typically range from $100 to $500, depending on the area. Sellers should check with their real estate agent or local government office to determine the exact transfer taxes or local fees they may be liable for during the closing process, as this will affect the overall closing costs for the seller.
3. Closing fees and other administrative costs
Closing fees are administrative costs related to the home sale and title transfer. These fees may include:
- Escrow fees: Fees charged by the escrow company handling the transaction, typically shared between the buyer and seller.
- Title search fees: A fee to research the property’s title and ensure there are no liens or ownership disputes.
- Recording fees: Fees for registering the new owner in the public records.
These administrative closing fees generally range from $250 to $1,500, but the exact amount will depend on the local jurisdiction and the complexity of the transaction.
4. Owner’s title insurance
In many states, sellers cover the buyer’s title insurance to protect against future ownership disputes. This one-time premium costs between $500 and $2,000, based on the sale price and location.
While not typically mandatory, covering title insurance can make a home more attractive to buyers, especially in a competitive market.
5. Prorated property taxes and utilities
At the time of closing, sellers are responsible for paying property taxes up until the day of the sale. If the home is sold mid-year, property taxes will be prorated, meaning the seller will only pay for the portion of the year that they owned the home.
The same applies to utility bills, such as water and electricity, which are usually prorated based on the closing date. These expenses can range from a few hundred to several thousand dollars, depending on local tax rates and the sale date.
6. Mortgage payoff balance
If the home has an outstanding mortgage, the remaining balance must be paid at closing. The lender provides a mortgage payoff statement, including:
- Principal balance
- Accrued interest
- Possible prepayment penalties (less common but can be 1%–3% of the loan balance).
Sellers should request a payoff statement early to avoid last-minute surprises.
7. Seller concessions
Seller concessions are an additional closing cost that sellers may cover to help reduce the buyer’s upfront expenses. These can include offering a seller-paid rate buydown, covering part of the buyer’s closing costs, prepaid taxes, insurance, or even home repair credits.
Concessions are negotiable but can range from 1%–3% of the sale price. Some loan types, like FHA and VA loans, limit seller contributions to 3%–6% of the purchase price. While concessions can attract buyers, they reduce the seller’s net proceeds, so they should be used strategically.
8. Other potential closing costs for sellers
While the above closing costs for sellers are the most common, there are a few other costs that could come up depending on the sale, including:
- Attorney fees: In some states, sellers may be required to have an attorney present at closing.
- Home warranty: Some sellers choose to purchase a home warranty for the buyer, covering repairs to major appliances and systems for a limited time after the sale.
- HOA fees: Sellers are responsible for prorated HOA dues up until the closing date. Additional fees may include transfer fees (typically $100–$500) and costs for HOA documents (usually $100–$400). Special assessments for larger projects may also be due at closing, depending on the situation.
Common mistakes sellers make when estimating their closing costs
Focusing only on commission fees
While commissions to agents often make up a large portion of closing costs for sellers, they are clearly not the only fees that need to be considered. Sellers may focus so heavily on negotiating commissions with agents that they overlook other important costs, such as repairs, credits to the buyer, or closing-related documentation. Failing to account for these additional costs can lead to unexpected costs or confusion when it’s time to calculate their final proceeds.
Misjudging seller concessions
In competitive markets, it may be tempting for sellers to agree to cover a large portion of the buyer’s closing costs in order to close the deal quickly. However, sellers sometimes misjudge how much to offer. Agreeing to too many concessions can significantly eat into profits. It’s important that sellers assess the market and buyer’s needs before committing to these concessions, as offering too much can diminish the overall sale price and reduce net proceeds.
Not factoring in prorated expenses
Sellers sometimes fail to account for prorated expenses, such as property taxes, utilities, and homeowner association (HOA) fees. As we’ve mentioned, sellers are responsible for paying their portion of these costs up until the day of closing, and these amounts can vary depending on when the closing date falls. If you’re selling your home late in the year, the prorated property taxes alone can be a significant cost.
How to reduce closing costs for sellers
While some costs are unavoidable, there are strategies you can use to lower your closing costs. Here are a few ways to reduce how much closing costs are for sellers:
- Negotiate agent commissions: Sellers can negotiate a lower rate with their listing agent and discuss who will cover the buyer’s agent commission, potentially lowering overall costs.
- Shop around for title and escrow services: Title companies and escrow providers set their own fees, so comparing options can help sellers find the most cost-effective choice.
- List your home at the right time: If possible, selling your home in a strong seller’s market can lead to higher offers or better negotiation leverage, reducing the need for price cuts or offering seller concessions.
- Negotiate closing costs with the buyer: Sellers can negotiate which closing costs they will cover, such as HOA fees or title insurance costs, potentially reducing their out-of-pocket expenses. If the buyer is rolling in closing costs to their mortgage, they might be willing to cover a bit more to seal the deal.
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