When buying and selling real estate there are many different costs involved in the transaction. Not only do you have to pay your Realtors or real estate agents a commission for selling the property or facilitating the transaction but there are closing costs on both sides. Real estate buyers will need to pay for mortgage loan fees, courier fees, appraisals, and any points they are paying to lower their interest rate.
But sellers have closing costs two. I've compiled a compilation of answers from real estate professionals on the different types of closing costs incurred by the seller.
"Homeowners that choose to sell their property will usually have a commission due to the listing agent. This commission is typically between 2% and 4% of the selling price, not the listing price of the property. Most listing agents will also put in a commission for the buyer's agent, or the agent that brought the buyer. The buyer's agent would usually receive the same amount of commission as the listing agent. So, for instance, most commissions are about 6%, which would be split evenly between the buyer's agent and the listing agent. The full commission is provided by the seller but these commissions can be negotiated and altered. For instance: the buyer's agent could receive 4% while the listing agent only 2% to encourage more activity for buyers agents on the property." [Don Payne]
Sellers will also have escrow settlement charges included in their closing costs. This could be imposed by the escrow or title company. This may also be included in "release charges". "When the seller obtains mortgage financing it usually was in the form of a deed of trust. This is similar to a mortgage but the property is deeded "in trust" to independent trustees who are authorized to sell the property if a default occurs. When the mortgage is paid in full, the trustees are entitled to a nominal "trustees fee" and there is a small government charge to record the trustee's release. These items are always withheld at settlement and deducted from the seller's funds." [Benny Kass]
"Many sellers will have to pay off their mortgage in order to close on a property. Most homeowners don't own their homes outright but will still have a loan do on their property. When they sell the property, the remainder of that loan needs to be paid off. If there are any additional loan such as a lean or a second mortgage, those will need to be paid off as well before the seller can gain the profit from the sale of the home. Your existing lender should be able to give you an approximate payoff figure and a tentative settlement date. You'll need to add daily interest charges until the lender receives the full mortgage payouts. Sellers should also ask if there's a prepayment penalty. Older loans may require the homeowner to pay a percentage of the loan if it's paid off in full prior to the full expiration of the mortgage term. Sometimes this penalty can be avoided or waived if you inquire with the particular lending institution. " [Eve Alexander]
"Sometimes sellers are asked to pay the closing costs of the buyer. While this is unusual it's actually required in a VA loan. If the property has been on the market for some time this could be the motivation that buyers need in order to place an offer on the property. It can be quite expensive but if the home is not getting any action, this is a good way for sellers to give in to the buyer in order to get the property sold. However, this can add between $5000 and $10,000 to the closing costs for the seller." [Tina Droessler]
In some cases, sellers might be asked to pay lender points. When buyers apply for financing they can buy down their rate by buying a point. A point is equal to 1% of the home loan. Several FHA and VA loans can put limitations on the amount which a buyer can pay for closing costs but this is where sellers can pick up the additional fees and pay points for the buyer in order to get the property sold. Seller-paid points are tax-deductible for the buyer but there could be negotiation advantages if the seller decides to split points with the buyer. [Todd Blair]
Every real estate transaction is different. I've had real estate transactions where there are government charges including "grantors tax" or a transfer tax. Each state is different as to who actually pays this fee in the transaction and it can be a negotiable item. Because every transaction is different buyers and sellers will have different closing fees and may be requested to pay each other's fees depending on how negotiations go. It's best to understand all of the details before finalizing a transaction.