EPISODE 40 – [FSBO] – HOME SELLER'S CLOSING COSTS

Are you considering selling your home yourself and wondering what expenses you'll face on closing day? Many homeowners focus on the selling price but overlook the costs that come out of their proceeds before they receive their check.

In this episode of the Happy Homeowners Hub Podcast, host Fred Turner breaks down the most common home seller closing costs in easy-to-understand language. Based on Chapter 7 of The Happy Homeowners Handbook for Selling Your Home "By Owner," this episode explains what to expect, how to prepare, and how to avoid expensive surprises at the closing table.

Whether you're selling your first home or your fifth, understanding your closing costs can help you negotiate with confidence and keep more of your hard-earned equity.

In This Episode You'll Learn:

• What seller closing costs are and why they matter

• Typical closing costs sellers should expect

• Attorney fees and when legal representation is recommended

• Title companies and title insurance explained

• Transfer taxes and recording fees

• Property surveys and why they may be required

• How property taxes are prorated at closing

• Homeowners Association (HOA) fees

• Seller concessions and buyer closing cost credits

• Escrow and settlement fees

• Paying off your mortgage at closing

• Common expenses homeowners forget to budget for

• Closing day tips that make the process smoother

• The Top 10 ways to avoid last-minute closing surprises

Along the way, Fred shares real-life experiences from working with hundreds of For Sale By Owner homeowners, adds a little humor to keep things entertaining, and provides practical advice that can save you time, money, and stress.

Books available from Happy Homeowners Hub and sold on Amazon.com

For more details on these books, check out HappyHomeownersHub.com 

                       Click on the Amazon book links below

The Happy Homeowners Handbook for Navigating Property Claims

The Happy Homeowners Handbook For Navigating Water Damage Claims

The Happy Homeowners Property Claim Documentation Booklet 

The Happy Homeowners Handbook for First-Time Homebuyers 

The Happy Homeowners Handbook for Selling Your Home by Owner 

The Happy Homeowners Home Maintenance Journal 

The Happy Homeowners Helper (A Children's book to help with a move) 

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Transcript

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Well it's closing day. Most homeowners think that closing day is simply where everyone signs a few papers, shakes hands, gets a check, and they head out for dinner to celebrate. Well yes and no. Because before that check lands in your bank account, there are several costs that many first-time home sellers never see coming. Today's episode is all about those costs. We're going to discuss what the seller closing costs are, which ones you can expect, which ones may be negotiable, and most importantly, how to avoid unpleasant surprises when you sit down at the closing table. This episode is based on chapter 7 of my book, The Happy Homeowners Handbook for Selling Your Home by Owner, available on Amazon.com. For more details, go to my website happyhomeownershub.com or see the information in the show notes. One of the biggest benefits of selling your home yourself is saving thousands of dollars in real estate commissions, but you still have other closing costs to plan for. Understanding what those costs are before you find a buyer can help you budget more effectively and negotiate with more confidence. So grab your favorite beverage, sit back in a comfortable chair, and let's talk about the money that leaves your pocket before the big money comes back to you. Welcome to the Happy Homeowners Hub Podcast, where we share real life stories and break down the lessons, mistakes, and wins that can save you time, money, and stress on navigating your property claim, buying your first home, selling your home by owner, and home maintenance and repair tips. I am your host, Fred Turner, and each week I'll guide you through these four topics. If you've been following the Selling Your Home by Honor series, congratulations! You've made it through preparing your home, pricing it correctly, marking it, negotiating offers, working through the inspections, and now you've arrived at one of the most exciting days in the entire process, the closing. What are seller closing costs? Let's start with the basics. Many people believe that only buyers pay closing costs. That's not simply true. Both buyers and sellers have closing expenses. The difference is they're each paying for different things. Think of closing costs as the final expenses necessary to legally transfer ownership of your home to someone else. It's similar to selling a car. You don't simply hand someone the keys. You have paperwork, you have to transfer the title, you have to pay certain fees associated with the home sale. Now multiply that process many times, and that's real estate. Depending on where you live, seller closing costs can often range from about 2 to 5% of the home's selling price. Although the exact amount varies by state and locality, so consult a professional, attorney, or loan officer for details. Let's use this example. You're selling a home for $400,000. If your closing costs total 3%, that's $12,000. That's not a number you want to discover 30 minutes before signing the papers. Here's a story. Years ago, when I owned the homes for sale by Honor Magazine, I talked with hundreds of homeowners and one gentleman proudly told me, Fred, I'm selling my home myself and saving $30,000 in commissions. I congratulated him. Then I asked, have you figured out your closing costs? There was silence. Finally he said, What closing costs? We spent the next 20 minutes reviewing everything that he would owe. He wasn't upset, he was surprised. And he was relieved because learning about those costs six weeks before the closing was much better than learning about them 30 minutes before the closing. Knowledge reduces stress. That's one of the biggest reasons I wrote my book, The Happy Homeowner's Handbook, for selling your home by owner. One of the first expenses may be attorney fees. Some states require an attorney for closings, others do not. Even if your state doesn't require one, I strongly recommend having an experienced real estate attorney on your team. Remember back in episode 35 when I talked about assembling your winning team? This is where they earn their paycheck. A good attorney reviews contracts, explains the legal language, and makes sure documents are accurate as well as protects your interest. The attorney can often catch problems before they become too expensive. Think about it this way. If someone offered to review a $400,000 transition for a few hundred dollars, don't you think that's money well spent? I certainly do. Title Company Fees. Another common expense involves the title company. Now you may wonder, what exactly does a title company do? Great question. Their job is making sure the property can legally transfer ownership. They research public records, confirm there aren't any outstanding ownership disputes, coordinate the paperwork, handle the escrow funds, and make sure everyone gets paid correctly. Imagine buying a home, moving in, painting every room, and then discovering someone else legally owns half the property. That would make for a very awkward neighborhood barbecue. Fortunately, title companies work hard to prevent that from happening. And then there's title insurance. Many sellers also pay for the buyer's owner's title insurance policy, depending on the local customs. Title insurance protects against hidden title problems that weren't discovered during the title search. Most of us insure our cars, our homes, even our smartphones. Title insurance protects one of our largest purchases that we'll ever have to make. It provides peace of mind long after the closing day. Next comes transfer taxes. This is one that surprises many homeowners. Some cities, counties, or states charge taxes simply for transferring ownership of the real estate. Sounds kind of strange, but it's very common. The amount varies tremendously depending on where you live. One city might charge very little, and another may charge several thousand dollars. That's why I always recommend talking to your attorney before listing your home so you understand exactly what applies in your area. Now let's talk about property taxes. Suppose you sell your house on July 1st. You've lived there for half the year. The buyer will own it the other half of the year. Who pays the taxes? Usually both of you. Taxes are often prorated. In other words, each party pays their fair share based on how long they've owned the property. Think of it like splitting a dinner bill. If you only ate half the pizza, you shouldn't pay for the whole thing, the other people should. The same concept applies here to property taxes. Depending on where you live, a property survey may be required. The survey identifies the legal boundaries of the property. It confirms where the fences are, the garages, the driveways, and other improvements that sit in relation to the property lines. If you've ever wondered whether your neighbor's fence is actually on your property or on theirs, the survey will answer those questions. Now let's talk about appraisals. Now technically, the buyer usually pays for the appraisal required by the lender. However, sometimes negotiations can take unexpected turns. Perhaps the appraisal comes in lower than the agreed purchase price. Now everyone has a decision to make. Will the buyer pay the difference? Will the seller reduce his price? Will they meet somewhere in the middle? This is why remaining calm during negotiations is so important. Remember, the goal isn't to win every negotiation, the goal is to successfully get to the closing table. If your home is located in a neighborhood with a homeowner association, commonly called an HOA, or you are selling a townhome or condo, there may be additional homeowner association costs. Depending on your association, you may have to repay, you may have to pay transfer fee, document preparation fees, resale certificate fees, or prorated dues. Some associations also require a status letter confirming your dues are current before the property can be transferred. This is one of those items that catches many sellers by surprise. My advice: call your HOA as soon as your home goes under contract. Ask them exactly what documents they need and what fees are involved. The earlier you know, the smoother your closing will go. Now let's talk about seller concessions. This simply means that the seller agrees to help someone pay for the buyer's closing costs. Now before you panic, that doesn't necessarily mean you're losing money. Sometimes agreeing to pay a few thousand dollars and buyers' closing costs can help keep the transaction together. Imagine you receive two offers. One buyer offers full asking price but asks for a $5,000 closing cost credit. The second buyer offers you $7,000 less with no concession. Which offer is actually better? Sometimes the higher price offer still leaves you with more money, that's why it's important to look at the entire transaction details, not just the purchase price. Now let's talk about escrow fees. Escrow is simply a neutral holding place for everyone's money and important documents until all conditions of the sale have been completed. Think of escrow as a referee in a football game. No one wants the referee to favor one side or the other. They simply make sure everyone follows the rules. Escrow companies collect the funds, pay out the mortgages, distribute the proceeds, record the documents, and make sure no one receives the keys until everything has been completed correctly. Their fee is usually shared between the buyer and the seller, although local custom may vary. Now there's paying off your mortgage. Here's something that many first-time sellers don't really think about. When you sell your home, your mortgage doesn't magically disappear. The remaining balance gets paid off directly from your sale proceeds. Suppose you sell the home for $450,000 and you still owe $225,000. At closing, the mortgage balance gets paid off first. Then your remaining proceeds are calculated after subtracting your other closing costs. Many homeowners are surprised because they expect a check for the full amount of the selling price. Instead, they're receiving the equity they built up over the years. That's exactly how it's supposed to work. Don't forget the little things. Closing costs aren't always the only expenses. You may also have final utility bills, moving expenses, cleaning costs, junk removal, lawn maintenance until closing, professional carpet cleaning, minor repairs agreed during the inspections, even pizza and donuts for friends helping you move. Okay, maybe the pizza and donuts aren't technically a closing cost, but trust me, buy the pizza and the donuts. It keeps your friends willing to help you move next time. I recall someone telling me about a homeowner who was so excited that he sold his home and he packed everything up, including the garage remotes. Unfortunately, he had moved to another state before realizing the new homeowners couldn't get into the garage. He had to overnight the remotes, and that wasn't exactly how he wanted to spend part of his first week in his new home. Before closing, make yourself a checklist. Garage door remotes, mailbox keys, extra house keys, security codes, instruction manuals, and anything that belongs with the home. Those little details make a huge difference to the new homeowners. During the inspection process, buyers sometimes request repairs or credits. Don't take it personally, no home is perfect. Even brand new homes have a punch list. Instead of viewing inspection requests as criticism, let's just view them as another negotiation. Sometimes you'll agree, sometimes you'll negotiate, and sometimes you'll offer a credit instead of making repairs. This credit is also called a concession. Stay flexible. Remember, your goal is getting to the closing table. So on closing day, what actually happens? Honestly, it's much less dramatic than television makes it look. You'll meet with your attorney, title company, or closing agent. You'll review documents, sign paperwork, verify numbers, provide identification, and review the closing disclosure or settlement statement. Once everyone signs, funds are transferred, the deed is recorded, and the buyers receive their keys. Congratulations, you've officially sold your home. People often ask me, hey Fred, how long does a closing usually take? My answer, usually it takes somewhere between 45 minutes and however long it takes everyone to find where they're supposed to sign. You'll sign your name, initial. You'll sign your name again, initial again, one more signature, and then another, and then another, and then another. By the time you're finished, your hand may be a bit sore from signing so many documents. Here's my top ten tips for a smooth closing. Number one, know your estimated closing costs before accepting an offer. 2. Hire an experienced real estate attorney. Respond quickly to requests from your title company. Keep excellent records throughout the transaction. Don't schedule your movers too tightly around your closing time. Delays occasionally can happen. 6. Keep the utilities on until after closing. The buyer deserves to know that everything works. 7. Leave the home clean. A clean house leaves a lasting impression. 8. Gather all the keys, remotes, manuals, warranties, and important information before the closing day. 9. Stay flexible during negotiations. Sometimes giving a little helps everyone reach the finish line. And number 10, don't celebrate until the paperwork is signed and the funds have officially been transferred. I've seen transactions fall apart at the very last minute. Thankfully it's very rare, but it can happen. Here's some final thoughts. Selling your home by owner is an incredible accomplishment. You've marketed your property, shown your home, negotiated offers, worked through inspections, prepared for closing, and now you've reached the finish line. Most homeowners discovered that selling their home isn't nearly as intimidating as they first imagined. Yes, there's work involved. Yes, there are details to manage, but with preparation, patience, and the right team of professionals, many homeowners can successfully sell their home while saving thousands of dollars in real estate commissions. Knowledge is truly power. And the more prepared you are, the smoother your closing day will be. If you've enjoyed this FISBO series, I strongly encourage you to pick up a copy of my book, The Happy Homeowner's Handbook for Selling Your Home by Owner. It walks you through the entire process step by step from preparing your home for sale to pricing, to marketing, to negotiating, to inspections, to closing, and everything in between. It also lays out each specific fee that's typically involved in the closing. You can find it along with my other homeowner resources at happyhomeownershub.com or in the show notes. Also, don't forget to sign up for the Happy Homeowners Hub newsletter. Visit HappyHomeownersHub.com, go to the contact us page and type the word newsletter in the message box to sign up. You'll receive podcast updates, home maintenance tips and reminders, repair tips, and information about future books and valuable resources also available. Here's the Happy Homeowners Hub Podcast Disclaimer. The information shared in this podcast is intended for educational and informational purposes only. Every real estate transaction is unique and laws and closing procedures and costs can vary by state or locality. This podcast should not be considered legal, financial, tax, or real estate advice. Always consult with a qualified professional, including a real estate attorney, accountant, lender, or title company regarding your specific situation before making important decisions. Thank you for joining me on this episode of the Happy Homeowners Hub Podcast. My goal is to make your homeownership journey smoother, smarter, and way less stressful. If you found today's episode helpful, please subscribe, leave a review, and share it with someone who may also be thinking about selling their home by owner. Every review, every share helps us reach the homeowners looking for practical and honest advice. I've got some great stories, tips, and occasional guest experts coming up in future episodes, so stay tuned. And remember, your home is your biggest investment. Be smart from the start. Thanks for listening. This is your host, Fred Turner, and I'll see you at the next episode. Have a blessed day. Goodbye.