Seller Closing Costs
In Washington State
Estimate of Closing Cost
As a rule of thumb, the seller closing costs in Washington State are about 9% of the sale price. There are a number of factors that can cause this to be a little higher. Purchase price can make a difference; less expensive homes tend to have a little higher closing cost ratio. When the home closes, can make a difference; interest and property taxes are figured to the exact closing date.
State Excise Tax
State Excise Tax in Washington for the sale of a home is 1.78% of the total sale price of the home. This is a seller closing cost in Washington that will differ in other states.
Title insurance is to insure that the seller is giving the buyer a clean marketable title at the time of sale. If the buyer is taking out a mortgage to buy the property, they will also be required to buy a title insurance policy to protect the lender.
Title insurance in Washington State is regulated by the insurance commissioner but they do not set the prices. Title insurance policy prices are competitive and fairly consistent from one company to the next.
A rough estimate of a seller's title insurance on an average price home would be 1/3 of 1%. This means that title insurance for a $180,000 home would be about $600. The percentage will increase as the price of the home goes down and decrease as the price of the home increases. Very expensive homes are as little as 1/5 of 1% or even lower. A $500,000 home would cost roughly $1,000 for a seller's title insurance policy.
Title insurance companies will often offer small discounts when they bundle services. If both seller and buyer get their policy is through the same title insurance company, it will be discounted.
Escrow is a service provided by a natural third party to a transaction to account for money, property and documents in that transaction. This service often involves a trust account for any money to be held.
Real estate escrow services can be provided by a title company, a closing service or a real estate attorney. Each of the three aforementioned is regulated by a different state agency. The price is not regulated by the government. Escrow service fees will vary, but the will be fairly competitive.
For the purpose of estimating, you can figure closing agent fees to be between $200 and $400. An average price home in Spokane of $180,000 would be about $300 and a home less than $100,000 would be about $200. Homes approaching a half million dollars range will cost close to $400.
Real Estate Commission
This is the money that the real estate agents receive for the service that they provide. Real estate brokers' commissions are not regulated and there is not a standard commission. There is no law or regulation that even states that it has to be paid by the seller.
As members of the same MLS, real estate brokerages have a cooperative agreement with other brokerages to pay them a commission if they are responsible for procuring a buyer for one of their listed properties. The brokerages also have agreements with their agents for commission splits.
For our example we will use 6% total commission being paid by the seller for the sale of their home. This 6% commission is agreed to in writing when the homeowner and the agent agree to the terms of the listing. In our example, the listing brokerage will offer 3% commission to the brokerage representing the buyer. This commission is indicated on the listing on the MLS.
The 3% retained by the brokerage representing the seller, as well as the 3% offered to the brokerage representing the buyer, are split between the brokerages and the actual agents representing the clients. There is no standard commission split between brokerage and agent, it is whatever they had previously agreed to.
With our 6% example, the seller would pay a total of $10,800 in commissions for a $180,000 home.
It is common to see less expensive transaction, like raw land, offer a higher rate of commission.
Recording is when the change of title has been recorded with county records and becomes public information. Normally the seller will pay to record a reconveyance of the title which will cost them about $150. If there are any other documents that require recording to complete the seller's end of the transaction, there would be additional charges for those. Examples would be a quit claim deed or a road maintenance agreement.
Utility Hold Back
The seller is responsible for all household expenses until the closing date. Because utilities are paid for after use, the seller will have a utility hold back. This is essentially money that is held in escrow until all of the sellers' obligations for utility services have been billed paid. At that time, they will be sent a check for the remaining balance of the hold back.
The seller is responsible for the property tax until the closing date. Some of the time this will be a seller debit and some of the time this will be a seller credit. This is one more reason why it is near impossible to know the exact closing costs and therefore know the seller net proceeds of the home sale, until right before it closes.
In Spokane County, property taxes are billed in 6 month intervals. The first half of the year is due by April 30 and the second half is due by October 31. As you can see, there are times when the seller would owe property tax on closing and there are times when they would be due a credit.
When there is a major improvement project performed in a neighborhood, the home owners in that neighborhood will often be required to pay the expense of that project through a special assessment. This will likely be paid over time. Some common examples are street improvements and sewers.
It is not uncommon for a home to have an unpaid balance on an assessment when it is sold. This liability is often passed on to the buyer. It is important to know the details of the purchase and sale agreement, (sales contract). This will explain who pays any assessments.
Homeowner Association Dues
Some neighborhoods have homeowner association and the will often times have association dues to pay for maintenance of common areas. The seller is responsible for these association dues up to the date of closing.
Interestingly, when the sale price of the home is not sufficient to pay all the expenses owed, the homeowner's association dues are pretty high on the list of what gets paid first. They would get paid after property taxes but before the first mortgage.
written by:Todd Hays