Selling a house in Utah can be expensive. Between repairs, realtor commissions, closing costs, moving, and more, the total expenses can easily add up to 10% or more of your home’s final sale price. Some expenses are negotiable and fluctuate with the real estate market. But sellers should expect to foot all or part of the bill for numerous costs to sell a house. If you’re considering selling your house in Utah, you’ll want to be sure to be knowledgeable about closing costs – what they entail, who pays them, and what fees you should be prepared for.
What Are Closing Costs
Closing refers to the closing of a real estate transaction. At this phase, the home has been shown, offers have been submitted and accepted, and now both parties are looking to complete the transaction. During closing, the cost of the home and the documents for ownership are transferred. This is the process where ownership transitions from the seller to the buyer. Closing costs are all the fees paid by buyers and sellers at the end of the real estate transaction. These fees cover an assortment of costs, including things like a title search, title insurance, home inspection, origination fees, and appraisals. Every state and every property will have different fees attached to it.
Who Pays The Closing Costs?
It’s important to understand that all of these circumstances can be negotiated when the offer is being made on the house. Both sellers and buyers can negotiate what percentage of closing costs they’re willing to pay if this is something important to them. Your real estate agent can work on these negotiations for you. Although it’s encouraged to reviewing closing costs thoroughly with your real estate agent, there are typical things that take place during a closing to be better prepared. In a standard sale it is normal for both buyers and sellers to pay part of the closing costs. Buyers typically pay more than sellers. For buyers, these fees include loan-related fees, appraisal fees, home inspection fees, credit report fees, title search fees, and lender’s title insurance. For the seller, closing costs typically cover things like a mortgage payoff (and possibly a prepayment penalty), any outstanding amount on the home, any repairs required after the home inspection, property or deed transfer taxes and recording fees. It is also typical for sellers to be responsible for paying the real estate agents’ commissions. Although, this is separate from closing costs and can be approximately 5-6 percent of the sale price on the property.
Closing Costs for Buyers When Buying a House in Utah
Loan Points, Impounds
Most homebuyers require a mortgage loan when buying a house. Mortgage lender fees make up a major portion of closing costs, approximately 2 percent to 4 percent of the sale price. Common buyer costs for a mortgage include the origination fee, lender administrative or processing fees, appraisal fee, credit report, application fee and points. Points describe the fee a lender charges for a certain interest rate. For example, discount points lower your interest rate and are also known as a buy down points. Points can also cover the lender’s origination fee – the cost to originate or make the loan. One point equals one percent of the loan amount. Lenders commonly charge a one percent origination fee to the homebuyer. Impound or escrow account reserves can also add to a homebuyer’s closing costs. Lenders may require it or homebuyers may opt to establish an escrow impound account for the payment of property taxes and homeowners insurance. The amount needed to establish the escrow impound account at closing depends on the time of year that closing takes place.
Escrow, Title, Miscellaneous
Escrow fees charged by the Escrow Company or attorney that handles the sale’s escrow process differ from escrow impound reserves. Owed to the escrow agent at closing, escrow fees include a base rate that depends on the sale price of the house. The title company also charges a base rate for the service of providing a title search and insuring the homebuyer’s lender via a lender’s title policy. The buyer and seller may agree to split the escrow fee equally, each paying his own fee as charged by the escrow agent, or one side paying the entire cost for the escrow services. It is a matter of negotiation. Buyer fees can also include a sub-escrow fee from the title company for receiving the loan proceeds from the buyer or borrower’s lender and making the required payoffs, a recording fee, notary and courier fees, as well as document preparation and home inspection fees.
Closing Costs for Sellers When Selling a House in Utah
Realtor’s commission fees
The real estate commission is usually the biggest fee a seller pays 5 percent to 6 percent of the sale price. The commission is split between the seller’s real estate agent and the buyer’s agent. In the majority (77 percent) of cases, the seller bears this cost. You may be able to negotiate a lower commission. Real estate agents are more likely to accept a lower rate when the home is expected to sell quickly, the local market is strong or the home price is relatively high. Many homeowners try to avoid these high fees by listing their home as for-sale-by-owner (FSBO). If you do that, be prepared to assume the duties of a real estate agent, including showing the place to prospective buyers, negotiating, hiring a lawyer to draw up the contract, and taking care of the transfer of title.
If you’re thinking about selling your home, it’s likely there are things you could do to enhance the appeal of your place and potentially raise its value. If you’ve been putting off sprucing up the exterior of your property, painting the inside, or repairing a staircase or a leaky faucet, now’s the time to make those changes. Also, if the buyer’s home inspector finds problems, such as a damaged roof or bad plumbing, you might have to pay to fix those issues in order to close the deal. Big repairs can set you back financially, so be prepared for them before you decide to sell, especially if you expect problems will be revealed during a home inspection.
Pre-sale Home Inspection
A presale home inspection is strictly optional, and it could cost around $400 or more. Some sellers make the investment because they want to find out about any structural or mechanical problems with the house before a potential buyer comes in with his or her home inspector. Getting a pre-sale inspection allows you to make major repairs ahead of time, removing any possibility of a buyer demanding them later or asking you to lower the price. Discuss with your real estate agent whether a pre-sale home inspection is recommended. Keep in mind that if your inspection reveals material defects with your home, you’ll have a responsibility to disclose them to a buyer, depending on your state’s laws for disclosure requirements.
Buyers like to envision what a house could look like after they move in. If you’re a seller, it’s worthwhile to spring for cosmetic repairs, like fresh, neutral paint and new flooring. Improving curb appeal with fresh plants or flowers can really appeal to buyers without costing too much. Twenty-eight percent of seller’s agents said they staged all homes before listing, spending a median amount of $400. Staging is usually helpful when the home is vacant. Realtors use the furniture to show the possibility of what that space can be. Depending on the furniture and the price of the house, (staging) can be very costly. Hiring a professional to stage your home might pay off. Stagers do what necessary to enhance a home’s best features while minimizing its worst attributes, and help prospective buyers imagines them living there. They rearrange furniture and accessories, declutch and depersonalize the home. They may even repurpose a room in a way you wouldn’t have imagined. The cost of a professional stager varies according to the size of the home, the extent of the work, the length of time the house is on the market and other factors. Expect to spend several hundred dollars, at minimum, and possibly thousands if you need a professional stager.
If you plan to move out before you sell your home, you’ll want to continue to pay for water and electricity. A home without air conditioning/heat and lighting can be difficult to show to buyers. Your current bills will give you an idea how much it will cost each month to leave on the utilities until a new buyer moves in.
The proceeds of your home sale will be used to pay off your mortgage, but it’s likely that the payoff amount on your mortgage statement is a little less than what you actually owe. You’ll likely have to add prorated interest you’ve accrued to the total balance. Additionally, you might have to pay a fee if there’s a prepayment penalty associated with your mortgage. Check your loan documents or contact your current lender to find out if your loan includes this condition.
Closing Costs And Additional Fees
While the closing costs to sell a house are typically the responsibility of the buyer, don’t be surprised if you are asked to foot the bill, especially if you are trying to sell your home in a buyer’s market (one which has a lot of homes for sale). Some of these costs may include homeowner’s association fees, property taxes, attorney fees, transfer taxes and title insurance. You also may be asked to pay an escrow fee, a brokerage fee and a courier fee. Altogether, closing costs can range from 2 to 4 percent of the home’s sales price. Sellers sometimes forget to budget for a title policy, which ensures that the title is free and clear. It is usually included in the closing costs, but you may be able to negotiate who pays it. In fact, many of these fees are negotiable, and it’s unlikely that a seller will be responsible for all of them. Still, it helps to be prepared.
Capital Gains Tax
Don’t forget to consider taxes. When you sell a home for more than you paid for it, which counts as a capital gain and might need to be reported on your federal tax return. The good news is, many homeowners are eligible to exclude up to $250,000 of profit ($500,000 for married couples filing jointly) of their main home from tax, as long as they haven’t used the tax break on another home sale within the past two years. The tax break applies if it was your primary home for at least two out of the previous five years.
Sellers also need to remember property taxes, which are dependent on if they are escrowing into their mortgage, Lopez says. Property taxes are usually paid in advance. The seller should pay the prorated share of property tax up to the closing date, with the money placed in escrow. However, if you’re selling your home and have already paid taxes for the year, you may actually get a rebate at closing. The buyer will reimburse the seller for the portion of taxes already paid that apply after the closing date.