The cost of buying or selling a home varies.
But there are a few expenses that are paid in almost every purchase or sale.
Seller’s Expenses
The seller will usually need to pay for the following:
- Realtor’s commission – 5 to 6.25% of the sale price
- Lawyer’s fee – $500 to $1,000
- Stamp tax – $4.56 per $1,000
- Payoff of seller’s mortgage or other liens
- Payoff of seller’s outstanding city or town fees (e.g., real estate taxes, final water bill, etc.)
All expenses will be deducted from the check that the seller receives at the time of the closing.
Here’s an example.
Sally sells her house for $100,000. Her realtor’s commission is 5%. Her lawyer’s fee is $500. And she has a mortgage with a current balance of $50,000.
The calculation would look like this.
$100,000 – Purchase Price
– $50,000 – Mortgage Payoff
-$5,000 – Realtor Commission
– $500 – Legal Fee
– $456 – Stamp Tax
$44,044 – Due to Sally at closing
Keep in mind that other small fees such as registry recording costs and final municipal bills may also need to be deducted.
Buyer’s Expenses
The buyer will pay for more services.
At the very least, the buyer will pay for the following.
- Lawyer’s fee – $500 to $1,000
- Title Exam – $150 to $250
- Land Survey – $150 to $250
- Owner’s Title Insurance – About $3.75 per $1,000
- Municipal Lien Certificate – $25 to $50
- Registry of Deeds Recording Fees – $125 for a deed
If the buyer is getting a bank loan to purchase the property, then there will be additional charges.
- Loan Origination Fee – about $500 to $1,000
- Appraisal – $350 to $450
- Tax Services – About $20
- Flood Certificate – about $10
- Registry of Deeds Recording Fees – $175 for the mortgage, $65 for the municipal lien certificate
- Lender’s Title Insurance Policy – this expense will vary depending on the type of policy your lender requires (standard or expanded) and whether you are also purchasing your own title insurance policy (i.e., an owner’s policy). Here’s a link that will allow you to calculate the cost of title insurance.
The lender will also require the buyer to set aside about two to three months of real estate taxes and homeowners’ insurance payments.
This money will be put into an escrow account and managed by the bank.
The bank may also require you to pay interest on the mortgage from the day of the closing to the end of the month.
Finally, you may need to purchase mortgage insurance.
It’s difficult to give a good ballpark number for the average buyer’s closing costs.
If you’re buying the property with cash, ask your lawyer upfront for a good closing cost estimate.
If you’re getting a loan, the bank will provide you with a document called the “Good Faith Estimate” or GFE.
The GFE will break down most of the expenses that you will need to pay on the day of the closing.
The expenses that you pay cannot greatly exceed what the lender estimated.
If the closing expenses do exceed the estimate by more than 10%, the lender will need to pay the difference.
Law Office of Justin R. McCarthy 