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Real Estate

Sold! Understanding Home Seller Closing Costs

Closing day. It’s the buyer’s reward for qualifying for financing. For the seller, it’s the day they see a return on the investment they’ve made in their home.

Three days before closing, the buyer receives the Closing Disclosure, which breaks down the costs of buying the home, including the monthly mortgage payment and interest. Both buyer and seller get the settlement statement—a summary of all fees associated with the real estate transaction.

Home seller closing costs often come as a shock. While most sellers know they’ll pay their real estate agent’s fees, the rest of the line items on the settlement statement can be confusing.

Before you turn the keys over to the new owner, learn more about the costs of selling a home.

Real Estate Agent’s Commission

Usually, the real estate agent’s commission represents the most substantial piece of the seller’s pie at the closing table. Commission fees average 5-6% of the home’s purchase price.

On paper, the commission comes out of the seller’s proceeds. However, the funds come from money the buyer pays to the seller. It’s not like the seller writes the real estate agent a check, but the fee reduces the amount of their check at closing.

There is a way to minimize the seller’s closing costs. Instead of hiring a real estate agent, you can list your home as an FSBO—for sale by owner. Most sellers who choose this route sell their house as-is.

Buyer’s Closing Costs

While it doesn’t happen with every home sale, it’s not uncommon for a buyer to ask the seller to pay all or a portion of their closings costs. The reason is that after coming up with the down payment, many buyers don’t have enough money left to cover closing costs.

The buyer’s closing costs average around 3% of the purchase price of the home.

Sometimes sellers balk at agreeing to pay the buyer’s costs, but for many buyers, without that help, they run the risk of not being approved for financing. If you agree to cover it, your settlement statement will reflect the amount.

Property Taxes

Depending on the state where you own your home, you either pay property taxes in advance, or you pay in arrears. When you sell the house, you’re responsible for taxes due from the beginning of the tax year to closing.

The buyer assumes the tax amount due from the date of closing until the end of the tax year. If you’ve paid taxes in advance, the buyer will reimburse you for taxes paid from the sale date through the end of the tax year.

Home Warranty for Buyer

A home warranty offers a buyer peace of mind. Presenting it as part of the sales price of the house can make a home more attractive to the buyer.

If you haven’t included it in the asking price, the buyer may request you to pay for a warranty.

Either the seller’s real estate agent or the title company handles ordering the home warranty, using the seller’s funds.

Title Company Fees

The seller’s real estate agent lists, markets, and negotiates the sale of the home. The title company ensures you have a clear title and they put together all the legal documents need to complete the real estate transaction.

Sellers pay two fees to the title company, and they include:

Deed Prep Fee

The title company drafts the document, called a deed, that legally transfers the property from the seller to the buyer. In some cases, the buyer will pay this fee, but more often than not, it’s the seller’s responsibility.

Seller Settlement Fee

The title company charges a settlement fee to cover all the work they do to prepare for the closing. Seller and buyer each pay a portion of the cost.

There may be other title company fees, but these two are the most common covered by the seller.

Government Recording and Transfer Charges

Most states charge a fee when real estate changes hands. It’s in the form of a sales tax based on the property’s value. Who knew you’d have to pay a tax on selling your home?

The tax shows as a deed transfer tax or real estate transfer tax on your settlement statement. The county where you sell your home collects the transfer tax for your state. They then stamp the deed, making the tax a form of a stamp tax.

After the closing, the title company files documents at the county recording office. The seller or the buyer can pay recording costs.

Title Insurance

Sellers may bear the responsibility to pay for title insurance. There are two types of title insurance:

  • Buyer’s Title Insurance
  • Lender’s Title Insurance

The lender’s policy protects the lender should the buyer default on their home loan. A buyer’s policy covers the buyer’s financial interest if title defects arise after the closing.

Buyers typically pay the lender’s policy, while often a seller will cover the cost of the buyer’s title insurance. In some states, it’s a given that the seller pays for the buyer’s policy.

Liens and Judgements

Before you can finalize the sale of your home, you must provide a clear title for your buyer. If you have outstanding tax or mechanic’s liens against the property, you’ll need to pay them off.

Usually, you’ll also have to pay off judgment liens. If you owe a creditor and they take you to court, the judge can enter a court order against you. This results in a judgment lien, which creates a cloud on the title to your home.

Feel More Confident About Home Seller Closing Costs?

Selling a home can make you feel relieved, excited, and sometimes overwhelmed and confused. We hope after reading today’s post, you’ll feel better prepared when you review your home seller closing costs.

If you’ve enjoyed reading this article, check out the archives on our blog. We’ve put together a collection of home selling tips and other posts designed to make homeownership more enjoyable.

Categories
Web Guides Real Estate Technology

The Changing Role of Technology in Buying Property

Like many other sectors, the residential property market has changed significantly thanks to the advent of technology. Today’s technology affords consumers access to a wealth of data and services. Whether it’s buying a pair of shoes, placing an order for the weekly groceries or allowing you to check your bank accounts at the touch of a button, technology has reshaped commerce as we know it – and it’s also helping to revolutionise the way the property market works too.

The residential property sector is slowly but surely beginning to move with the times and innovate, bringing with it new opportunities for prospective buyers to improve the end-to-end efficiency of property transactions, from research and viewings through to mortgage applications and moving days. Let’s take a closer look.

Browsing and viewing properties

At the very start of the property buying cycle, it’s important to note the impact that digital property portals have had on disrupting the way people find available homes on the market. The reliance on estate agents has diminished in recent years, as agents and private owners have the ability to market available property via platforms such as Rightmove and Zoopla. Search functionality allows prospective buyers to filter available properties to suit their unique requirements, based on factors such as property type, size or proximity to a particular area, in addition to providing a wealth of information including integration with Google Maps, automatically generated information about schools, surgeries and other services in the area and so on.

Some estate agents are even choosing to try and circumvent the need for property portals by offering virtual reality (VR) viewings. By donning a VR headset, it’s possible to immerse yourself in a virtual walkthrough of an entire home. This is achieved through the use of cameras and sensors to create an accurate representation of a property, including the depth and distance of each room, so that they can be explored with 360-degree vision.

Mortgage applications

Prior to the 2008 recession, the importance of mortgage applications wasn’t anywhere near as high as it is today. As new regulations enforced in 2014 meant that mortgage lenders are now duty bound to guarantee that applicants can afford the mortgages they are applying for, there has been a marked rise in the number of online mortgage brokers and mortgage comparison portals. 

These online brokers have partnerships with various high-street and bespoke mortgage lenders, allowing them to recommend a mortgage product that befits an applicant’s personal situation, such as those who are self-employed or those who need to get a bad credit mortgage. Such opportunities that offer the lowest interest rates and upfront product fees are now typically reserved for those requiring the lowest loan-to-value ratio.

Credit checks

Buying Property

Years ago, credit ratings and histories were never even part of the equation for mortgage applications. Today, credit ratings are increasingly influential and can help lenders determine your risk as a borrower, based on your previous financial conduct. Fortunately, there are now a number of credit checking platforms you can use to check your up-to-date credit score based on current and previous borrowing and your ability to keep up with the repayments. It’s a very useful tool for prospective buyers as it helps to determine how much of a risk they are likely to be before going through with a full mortgage application.

Removal services

In the past, sourcing a reliable, reputable removal firm to assist on your moving day was all about word of mouth. If a friend or family member recommended a company, you’d ordinarily trust them and give them a try. However, technology has opened up buyers’ reach to a wider net of removal services. Platforms like Reallymoving compare costs for removals, surveyors and conveyancing firms in your region to help you find the right balance between value and expertise based on quotations and thousands of reviews.

Technology has armed prospective property buyers with so much more information about houses, plots and flats for sale, available at their fingertips. It’s all geared towards improving the efficiency of the moving process and ensuring you get maximum value for money. Recent developments show this trend is likely to continue, with even more innovations added.

Categories
Real Estate

Smart Property Buying Tips from the Real Estate Experts

There are both a right way and wrong way to buy a property, the latter of which may cost you loss of a lot of money and time. It will ultimately end up in stress and frustration only than a rewarding home. So, you need to use the best practices while thinking of a real estate purchase. For those who are confused about it, especially freshers, here we will discuss a few tips from the experts.

Research on the agents before choosing

There are innumerable real estate agents you may come across while planning to buy a property, but not all of them are reliable and genuine. The choice among the right and wrong real estate agents may make a big difference when it comes to buying your dream home and negotiating over the best price.

You need to do proper research up front in order to take a wise decision in terms of choosing a qualified real estate agent. By signing up with a real-estate agent, you are actually establishing an important business relationship. You need to work closely with the agent in a good rapport to get hold of the best deals. It may sometimes take several weeks to many months before completing the entire buying procedure, and the agent-client relationship should be kept solid throughout this period. So, try to communicate with a handful or real-estate agents to understand whether they are reliable for you to fix one finally.

Some questions you can ask them are:

  • How often may you send me a listing?
  • Whether you will show me homes at my comfort timings?
  • How many years of experience you have in real estate?
  • How many real estate deals you have successfully closed?
  • Which area are you specializing in like single-family home, condors, or, etc.?
  • Do you ever work with any clients in the desired area and with a similar budget?

Managing debts is essential if you want to make some savings for real estate investment. So, we will discuss some such tips for the first-time real estate buyers who are in debt to consider.

Tips for effective debt management

Many people believe that their financial problems may ultimately end up in bankruptcy filings. In fact, debt management is a solution, which may are not aware of. There are many different approaches in debt management like:

  • debt mitigation
  • debt management
  • debt settlement
  • debt consolidation etc.

If you approach it properly, filing a bankruptcy falls only at the extreme end of the spectrum, which comes with a lot of ongoing issues also as a last resort. Even when you trigger a bankruptcy, you need to go through a tiring process. So, this shouldn’t be considered as the default options as soon as you find yourself in debt chaos, but there are many remedies to explore. Let’s further look into some tips for effective debt management.

The process of debt management

As put forth by https://www.libertylending.com/, the debt management processes are actually designed to handle the existing debts of an individual in a better way. In order to effectively pay off the debts, one needs to maintain proper discipline and good decision making. The primary step towards successful debt management is to control all unnecessary spending and save better. There are many ways to work around the process of debt management like freezing the debit cards, removing credit card details from all the e-commerce sites, and curtailing the expenditures.

The primary rule is that you should be able to distinguish between your needs and wants effectively and if you fail to understand this well in any case, delay the purchase until you are certain. Additionally, it is also advisable to pay more than the minimum monthly balance on outstanding debts to pay them off faster. By living well within your means, it is not impossible to get rid of debt and live a more peaceful life.

Prioritize the repayments

Considering the debt continuum, there are many debts which can be considered as priorities. Say, for example, the high-interest credit card repayments may have higher APRs. The bad credit loan debts with a higher interest rate can also be put in the same category. Once if you effectively take care of the most expensive debts, you can further move towards reducing the other debts and effectively pay them off over time. 

You need to know that there are both good debts and bad debts. Good debts are things like educational loans or home loans etc. Good debts safeguard investment and also ensure you a fair return on investment. However, bad debts are actually spent as dead investments, which don’t offer any returns. You need to have better control on both to ensure that you don’t fall into a troublesome debt situation.

Whatever debt management programs you on like consolidation or settlement, you need to control your spending further in order to stick to the plan effectively and get rid of debts. Keep a close watch on your spending habit and ensure that you cut off all those luxury costs in order to ensure a better monthly saving and ultimately more pay-off towards your debt repayments.

Use social media real estate groups for the locality

As of late, social media is a good resource to connect with real estate agents and also the local sellers directly. This is more important when you are planning to buy property in an unfamiliar area. Social media acts as an excellent platform to establish a local connection and to get instant updates on who are selling, buying, renting, etc.

There could be many Facebook real estate groups you can easily find. If you are actively seeking for a property, join these groups and become an active communicator. You may feel free to post your requirement also on the wall to see what replays you get. Specify your need and add your e-mail ID (if not a trouble, your phone number too) to see who responds.

As an add-on point, also note that it is essential to conduct a home inspection too before evaluating the real estate property you are considering. Even though it costs a bit, it is fully worth by knowing the interior and exterior issues of the property to ensure that you get the best ROI.