A Guide to Understanding Home Closing Costs for Sellers

May 29, 2023 - 5 min read

There are a lot of steps involved when selling your home. One of the final ones in the process is closing. During closing, legal documents will be finalized, funds will be distributed, and closing costs will be paid. That begs an important question: How much are closing costs for a seller?

Avoid sticker shock on the day of closing by learning more about closing costs for sellers and what you can expect to pay. Read on to understand the typical closing expenses, how seller closing costs are calculated, when they are due, and how to negotiate them.

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What are closing costs?

Closing costs are the fees incurred by sellers during the sale of their property. Buyers must pay separate closing costs, while sellers are responsible for their own closing costs. These expenses include bills related to real estate agent commissions, title insurance, appraisals, legal fees, and more.

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“Many times, sellers are not aware of all the costs involved in selling a home. Many are surprised when they learn about these expenses during the process,” says Jason Gelios, a Realtor in Southeast Michigan. “Sellers need to be aware ahead of time of the amounts they will be responsible for so they can better determine the home’s price and their budget and know what they will walk away with at closing.”

How are seller closing costs calculated?

Most seller closing costs are determined based on a percentage of the home’s sale price and can vary depending on the municipality and state in which the property is located.

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According to Zillow, the average closing costs for sellers equates to approximately 8% to 10% of the home’s sale price, or roughly $32,030 to $40,038, based on the median U.S. home sale price of $400,378 (as of March 2023).

“There is no specific formula for calculating closing costs. What sellers will pay will be based on many different factors,” says Sarah Stitgen, an attorney with Cook & James, a Georgia-based law firm. “There are no set costs you can count on, as they will be unique to each transaction.”

What are the typical closing costs for sellers?

Common closing costs for sellers include several different items:

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  • Real estate agent commission – This is typically the largest closing expense for sellers, as it covers the commission for both the buyer’s agent and seller’s agent (yes, sellers usually pay both commissions), which collectively ranges from 5% to 6% of the home’s sale price.
  • Title insurance – This ensures that the buyer receives clear ownership of the property with no outstanding claims, liens, or encumbrances; total title insurance costs often span 0.5% to 1.0% of the sale price, per Erica Davis, loan officer/branch manager for Guild Mortgage in Myrtle Beach, South Carolina.
  • Transfer taxes – These fluctuate by state but usually cost about 1% to 3% of the sale price.
  • Attorney fees – These can vary from around $500 to $2,000, depending on your area.
  • Escrow fees – “These fees cover the cost of the escrow agent facilitating the transfer of funds and documents and can cost around $500 to $2,000,” Davis says.
  • Prorated taxes and utilities – These cover the portion of the year when you owned the property and can set you back from a few hundred dollars to a few thousand dollars.
  • Home warranty – Including a buyer home warranty can often total between $400 and $600.

Case in point: Using these estimated average figures above, if you sell your home for $400,000, you can probably expect to pay between $32,000 and $40,000 total in closing costs – perhaps more, possibly less.

When are closing costs due?

“During the actual closing process, the seller can expect to sign various documents and paperwork related to the sale, including the final settlement statement detailing all costs and fees. Closing costs are due at the time of closing, which is typically scheduled after the buyer has completed their due diligence and obtained financing,” explains Eric Bramlett, a Realtor in Austin, Texas.

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The settlement agent will ensure that your closing cost items are paid.

The good news is that what you’ll owe at closing will be subtracted from your home sale proceeds. So, using the above example, if your home sells for $400,000 and your closing costs are $32,000, you’ll walk away with $368,000 at closing (not including what you may still owe to your mortgage lender or other lien holder).

“Expect to sign some documentation after having reviewed your closing package given to you several days before the closing date. Once the closing is finalized, sellers receive their proceeds as either a cashier’s check or a wire to their account,” notes Gelios. “The title company then issues overnight payments to a mortgage lien holder and any other account that needs to be satisfied.”

How can sellers prepare for closing costs?

It’s smart to carefully review and understand the terms of your real estate contract and settlement statement, given to you by your agent, attorney, or title/escrow agent, and any fees that will be your responsibility, the experts agree.

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“Ask for a closing settlement statement in advance so that you have the opportunity to see your fees. And ask any questions about anything you don’t understand well ahead of closing,” suggests Stitgen.

In general, “it’s important to stay informed and advocate for yourself throughout the closing process to ensure you are not caught off guard by unexpected expenses,” Davis adds.

Tips for negotiating seller closing costs

Negotiating your seller closing costs can be a useful way to decrease your expenses.

“If you are fortunate to be in a seller’s market, there could be an opportunity to bargain down your closing costs with the buyer so that the buyer wins the bid over competitors,” Gelios says. “However, I don’t often see many seller closing costs that are paid for by the buyer nowadays. But I do observe sellers negotiating the real estate agent commissions.”

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Indeed, one way to potentially lower your closing costs is to choose a flat-fee Realtor, discount broker, or low-commission broker who agrees to accept a smaller commission percentage.

Another strategy is to sell your home yourself as an FSBO (for sale by owner), in which case you won’t have to pay any agent commissions. However, this option may result in a lower home sale price and/or your property sitting longer on the market because you lack the savvy and negotiating skills an experienced agent can bring to the process.

Additionally, you can attempt to negotiate lower prices directly with some of the parties who will be providing services, including your title insurance company, real estate attorney, and escrow agent.

The bottom line

Seller closing costs can add up quickly. That’s why it’s best to calculate and comprehend what you can expect to pay by the closing date for various fees and services.

Being a more knowledgeable seller can help you make more informed choices earlier in the process, including which real estate agent to partner with and what to include or exclude in your real estate contract.

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Erik J. Martin
Authored By: Erik J. Martin
The Mortgage Reports contributor
Erik J. Martin has written on real estate, business, tech and other topics for Reader's Digest, AARP The Magazine, and The Chicago Tribune.
Aleksandra Kadzielawski
Reviewed By: Aleksandra Kadzielawski
The Mortgage Reports Editor
Aleksandra is the Senior Editor at The Mortgage Reports, where she brings 10 years of experience in mortgage and real estate to help consumers discover the right path to homeownership. Aleksandra received a bachelor’s degree from DePaul University. She is also a licensed real estate agent and a member of the National Association of Realtors (NAR).