Each step in the process of selling your home on the traditional market comes with a cost. Then, after all of the anticipation, you have finally sold your home, and the new focus becomes the complex closing process wherein the title on the home transfers to the new owners. So often, sellers’ purchase of their next home depends on the proceeds from the sale, and unforeseen hurdles at the closing soon create a nightmarish flurry of problems and more cumbersome paperwork.
The process can be overwhelming to first-time sellers; being caught off guard at closing is more than unpleasant. Deductions made from the proceeds of a traditional real estate transaction can quickly dwindle the amount of cash you’ll have in hand when you walk away from the closing table. For sellers, closing costs can add up to eight to ten percent of the proceeds or more. Therefore, sellers must be aware of the expenses associated with this process to walk into the closing with realistic expectations. We will explore what Memphis home sellers need to know about the closing costs.
Memphis home sellers need to know about prepayment penalties on the mortgage or equity loan payoffs in the closing costs. It’s possible to lose money on the sale after paying exorbitant penalty fees. However, in the best-case scenario, your final sales price pays off the balances on any loans and leaves you with a profit.
Commissions and Fees
Real estate agents charge Memphis home sellers a commission for their services, paid at the closing. Sellers also pay the agents commissions for the buyers from the proceeds of the sale. The typical amount is six percent of the home’s final sales price, divided between your real estate agent and the agent for the buyers. Often, the buyers and sellers split the escrow fees depending upon the terms of the contract.
Taxes and Document Fees
Naturally, sellers must pay any taxes still due on the property in full before the title transfers and the document recorded, for which sellers will pay a fee at closing. Thus, transfer taxes are another closing cost Memphis home sellers will pay when the title transfers to the buyer.
Memphis home sellers need to know about the title insurance, protecting the buyers from possible title defects, typically paid from the sellers closing costs for the buyers.
Often Memphis, home sellers hire attorneys to represent their interest at closing and need to know these attorney fees may be part of the closing costs.
These costs, while not taken from the proceeds directly, should still be considered. In addition, you may need to consider any effect the sale may have on your income taxes and any capital gains. These include the title company, which may charge fees, depending upon the services they provide. Additional expenses that Memphis home sellers should be aware of are the remaining balance of any existing liens or judgments against the property, any homeowner association fees that may be due as well as prorated property taxes. In addition, sellers must complete any agreements for repairs or any other improvements in the sales contract as out-of-pocket expenses before closing. If you sweetened the deal by offering to pay the buyers closing costs, these would also come out of the final proceeds. Finally, sellers must have also paid any other service providers involved in the transaction at this time.
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