Buyer and seller closing costs vary from state to state. They are also negotiable between the parties. Buyers’ and sellers’ willingness to negotiate can depend on if it is a buyer’s or seller’s market or simply how eager one or the other is to complete the deal.
For example, in a buyer’s market when homes for sale are plentiful and buyers are hard to find, a seller might “sweeten the deal” by offering to pay some of the buyer’s closing costs. Likewise, in a seller’s market, a buyer might take on some of the seller’s expenses as an extra incentive to choose their offer over others. Any such agreements should be put in writing and paid at the closing meeting.
In the absence of any negotiations about who will pay what, these are the items that normally make up seller closing costs:
Real estate agents’ commissions. Commissions account for the difference in closing costs for buyers vs. sellers. The seller pays their own agent’s fees but also those of the buyer’s agent. These average about 3% of the house’s sales price to each agent, totalling about 6%.
Escrow fees. Administrative and office expenses for the escrow account are the only closing costs that are shared equally by the buyer and seller. This might be collected as a flat fee or a percentage of the sales price—usually about 1%.
Transfer tax or title fees. This is an administrative fee charged in some states to pass the title from one owner to the other. Missouri does not require a real estate transfer tax or fee. Illinois, on the other hand, charges a tax with varying rates for different parts of the state. Our Select Properties agents serve the Metro East region in the southwestern part of the state where the transfer tax rate is 0.10% of the final selling price.
Buyer’s title insurance. The buyer pays insurance to protect their lender in case there are disputes about the title. The seller pays insurance to protect the buyer’s interest. This is a single payment rather than an ongoing insurance premium as the name might suggest.
Penalty for prepayment. Some mortgages contain clauses that charge a fee to pay the loan off early. The fee is added to the amount of the mortgage payoff and both are due at closing.
Prorated property taxes. The seller needs to pay taxes for each day they live in the house. This means their payment at closing will depend on the timing of the sale and when they made their most recent tax payment. For example, if the seller owns the house for exactly one one month after their last tax bill, and that payment covered the previous six months, they will owe one-sixth of that amount as prorated property tax.
Homeowners Association Fees. If the house is part of a Homeowners Association, the seller pays prorated dues just like prorated property taxes for each day they occupied the home. In addition, they may have to pay a transfer fee. These are sometimes charged by HOAs, switching membership with each change of homeownership.