How Much Does it Cost to Buy a House?

Part II of II: Sellers’ closing costs explained

By: Coral Dworaczyk

In the last issue of Inspire, we explored the typical closing costs and expenses paid by homebuyers at closing or settlement. Sellers also have expenses that should be taken into account before a final sales price is set for any property. Here is a quick review of closing costs commonly incurred by sellers in the Coastal Bend. Please keep in mind that there may be other additional costs under specific circumstances.

Typically, the largest expense paid by sellers when selling a property through a brokerage is the broker’s compensation, or the fee paid to the listing broker to market the property and to attract the largest pool of potential qualified buyers. Real estate brokers in our area usually cooperate with each other and share the total commission paid by the sellers between the sellers’ listing brokerage and their agents and the buyers’ brokerage and agents. This often confuses new sellers when informed that they are also paying the buyer’s agent, but, in essence, the seller is paying the buyer’s agent for bringing the buyer to the proverbial table.

It is important for all parties to know that legally, this compensation or commission rate and the sharing of compensation between brokers is not fixed, controlled, recommended, suggested or maintained by the Association of REALTORS, the local MLS system or any listing service. Instead, this seller expense and its distribution between parties is negotiated between the seller and the real estate agent hired to list the property for sale. If a seller decides to list the property as “for sale by owner”, or “FSBO,” no brokerage fees are paid unless a prospective buyer has selected an agent and requests that the seller pay his or her commission.

In addition to paying the brokerage fees, there are other seller closing costs. Most of these are related to title expenses. In our area, the seller traditionally pays for the owner’s title policy. This title insurance policy ultimately protects the new owner (and also the lender if there is a mortgage involved) against property losses or any potential damages from liens on the property, encumbrances or defect in the title to the property. The cost of this title policy varies based on the contract price of the property.

In addition to the title policy expenses, there are other fees from the title company related to attorney fees (for drafting the title documents), escrow or closing fees and fees associated with recording the new deed and paperwork with the county. The seller may also have purchased a home warranty (also called a residential service contract) for the buyer, and this may also be billed and paid from the seller’s proceeds at closing.

Prorated property taxes are also collected from the seller on the day of closing. Keep in mind that property taxes are paid in arrears. For example, the 2015 property taxes will be paid in one lump sum at the end of 2015 or the very beginning of 2016. Therefore, the taxes are prorated on a daily basis from Jan. 1 through the day of closing and paid to the buyer to hold (personally or in their escrow account set up by the buyer’s lender) until the property taxes are due and billed by the county.

Sellers often ask how all parties will be paid as the actual closing date nears. Fortunately, the title or escrow company takes care of this task. A final settlement statement will be prepared by the title company and the lender (if there is a mortgage involved). This will outline the buyer’s and seller’s expenses and officially inform both parties how much they need to bring to or expect to receive at closing.

After all of the official closing documents have been signed, the title company will collect monies from the buyer and lender (this is called “funding”), and then issue payments to the seller’s mortgage company (if there is a remaining mortgage on the property), the brokerages and agents involved, the title company, any unpaid contractors that may have performed repairs on the home being sold (as may have been negotiated in the contract) and then finally, issue the remaining balance to the seller in the form of a cashier’s check or wire transfer.

Once the documents have been signed and funds have been transferred, the transaction is considered to be officially complete. Sellers and buyers should always keep in mind that legal possession of a property officially transfers to the new buyer only after all documents have been signed and the transaction has been funded, unless a temporary lease has been established.

Coral Dworaczyk is a realtor at Better Homes and Gardens Real Estate-Bradfield Properties in Corpus Christi, Texas.
For more information, please contact her at 979-229-2836 (cell) or via email at

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