Paying for a home sale can be complex, with many expenses to consider. Here’s a look at who pays for what in a typical real estate transaction.
Closing costs are typically split between the buyer and seller, though there are some costs that one side or the other typically pays. For example, the seller typically pays for the cost of transferring the property deed and title insurance, while the buyer covers the home inspection and mortgage fees.
Knowing who is responsible for which costs can help ensure a smooth sale. If you’re selling your home, be sure to budget for these common expenses:
- The cost of transferring the property deed and title insurance
- Real estate agent fees
- Mortgage payoff
- Home inspection
- Any repairs required based on the home inspection
- Closing costs
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Who pays the real estate agent?
When you sell a home, you will likely pay real estate commissions. These commissions typically total between 5% and 6% of the sale price and are paid to the listing agent. The listing agent then shares roughly half of this amount with the buyer’s agent.
When considering selling your home by yourself to save on commission costs, keep in mind that you may miss out on some potential buyers who would be interested in purchasing your home if they knew an agent was involved.
While selling FSBO can be a lot of work, it can result in cost savings. It’s recommended that you still offer a buyer’s agent commission when you’re selling FSBO, as you’ll want to attract as many potential buyers as possible. Some buyer’s agents may be less inclined to show their clients your home if they won’t receive a commission.
Who pays for escrow?
Escrow fees can vary based on the services required, but are typically split 50-50 between buyer and seller. Escrow fees cover the costs of an independent third party to conduct the closing and manage funds during the transaction. This ensures that all parties involved in the transaction are protected.
Who pays for the home inspection?
A home inspection is an important part of the home-buying process. It is the buyer’s chance to get a close look at the property and find any hidden defects that could impact the home’s value, cost a lot of money to repair, or make the home unsafe to live in.
Who pays for the home appraisal?
The cost of the home appraisal is usually paid by the buyer. This is a service that is often required by lenders when someone is taking out a mortgage to buy a home. However, some buyers choose to complete appraisals for peace of mind, even if it’s not required.
Who pays for title insurance?
The buyer and seller both pay for title insurance, but the type of coverage is different for each. The seller pays for a policy that covers the buyer, and the buyer pays for a policy that covers their lender. In general, title insurance ensures that the home is free and clear of any unknown claims by third parties.
What about the home warranty?
The home warranty is something that the seller pays for. It is often offered as an incentive to attract buyers, but it is not required. Offering a home warranty gives the buyer assurance that they will not have to pay any huge repair bills soon after moving in. Most policies are good for a year and they typically cover the home’s major systems, including plumbing, electrical, and appliances.
Don’t forget about transfer taxes!
The new owner is responsible for paying any real estate transfer taxes, which are charged when the title for the home is transferred from the old owner to the new owner. Transfer taxes can be levied by a city, county, state.