Whether you are on the buying or selling end of a real estate transaction, the transfer of ownership of a home is likely one of the largest financial transactions most people encounter in their lifetimes. For this reason, it is important to understand the most common fees when buying or selling a home.
Seller Costs
Perhaps you are wondering why a seller would have any costs in selling a home, but there are indeed fees and expenses to consider. According to Bankrate sellers should, “Plan for 5 to 6 percent of the purchase price to cover real estate agent fees, which are typically paid by the seller. Add to that an extra 2 to 4 percent of the price to pay for costs like attorney fees, transfer taxes, and other expenses.”
Sellers will typically pay real estate commissions. Although this expense is usually split between the buyer and seller, the seller typically takes the larger burden of the fee. There are also closing costs that the seller should expect. Things like homeowner association fees, escrow fees, brokerage fees, as well as property tax and title insurance could be the seller’s responsibility.
Finally, sellers should consider those hidden costs like home repairs that the buyer has requested to be fixed in the real estate contract, final utility bills on the property, as well as any moving, storage, or relocation costs.
Buyer Costs
If you are the party purchasing a home, it is fair to assume that you are aware that the brunt of the financial impact rests on you. Many home buyers have been conditioned to think that all of the costs of buying a home are lumped into the final transaction for the mortgage loan, and while many of them are, that simply isn’t the case for every expense.
In the early stages of home buying, some costs home buyers should expect include earnest money to secure their good faith offer. This usually comes directly out of pocket for potential buyers. On the front end of the sale, there will also be fees like inspection fees, land survey fees, and appraisal fees.
As the home buying process progresses, fees like property taxes or property tax transfer fees as well as the cost of the down payment on the mortgage will be added to the list of costs to the buyer. At closing, buyers should expect expenses for notary or legal issues in order to finalize the transfer of ownership. And possibly, the buyer may have negotiated to split some of the realtor fees with the seller to get the final purchase price in agreement.
Upon immediate transfer of ownership, buyers can expect to begin paying for homeowners insurance, the transfer of all utility bills at the residence, as well as any costs to get the home ready for the move. Many buyers choose to make any renovations or upgrades prior to the move-in date. Don’t forget any costs associated with closing out accounts at a previous residence as well as costs to transport or store home items from one dwelling to the next.
Whether you are considering buying a home or selling your existing home, this can be an incredibly exciting time. However, before embarking on such an adventure, be sure to fully understand some of the common fees and expenses you should expect when you participate in a real estate transaction.
