Understanding Seller Proceeds

There are many costs associated with selling a home. If you aren’t aware of them all, you may make a mistake when attempting to calculate the proceeds from the sale. Here is a list of the many closing fees and terms you may encounter during the closing process and on the final day when the sale is complete. Knowing what they mean and what fees you may be responsible for will help you better understand your total proceeds.

It’s also important to note that many fees the buyer typically pays can sometimes be paid by the seller at closing instead. This usually happens when the seller offers to cover some closing costs to incentivize prospective buyers seeking to purchase the home. You won’t have to worry about doing that in a seller’s market, but be sure to include it in your consideration when calculating your seller proceeds.

Important Terms and Fees for Home Sellers to Be Aware Of

Estimated Closing Date: Although you will receive a closing date when you initially sign your purchase agreement, this date could change. As of that point in time, it is only an estimated closing date. The closing attorney will set the actual closing date. There are also many reasons a closing date might change — this is normal in real estate transactions.

Sale Price: Although a home may be listed at a specific price, the sale price refers to the price the buyer will pay once negotiations are complete.

Mortgage One Balance: If you have two loans on the same home (sometimes called a piggyback loan or a home equity loan), you may see them listed as Mortgage One and Mortgage Two on the closing documents. The Mortgage One balance is the balance of the first loan.

Mortgage One Interest Rate: This refers to the interest rate on the first mortgage on your home.

Accrued Interest: This is the interest that has been incurred on a loan at a specific date but has not yet been paid.

Mortgage Two Balance: If you have two loans on the same home (sometimes called a piggyback loan or a home equity loan), you may see them listed as Mortgage One and Mortgage Two on the closing documents. The Mortgage Two balance is the balance of the second loan.

Mortgage Two Interest Rate: This refers to the interest rate on the second mortgage on your home.

Day Payment Is Due: This is the day you are expected to make your payment in full to avoid being charged any additional interest.

Prepayment Penalty: Some lenders may charge a penalty if you pay your mortgage early. That’s because the lenders are losing out on the interest they would have earned had you paid the mortgage through the full term.

Annual Property Tax: All homeowners must pay property tax, which is calculated annually. The amount will vary depending on several factors; where the home is located and the tax appraised value of the home, for example. Although many mortgages require you to pay property tax as a part of each monthly premium, these monthly tax payments are typically held in escrow until a lump sum payment is due annually.

Property Taxes Paid Through: Most homebuyers pay property taxes monthly as part of their mortgage premium. The lender then holds these tax payments in escrow until the property tax is due, either annually or semiannually. In some states, you will be responsible for paying property taxes directly rather than through your mortgage lender.

Annual Homeowner’s Insurance: Purchasing homeowners’ insurance is a requirement for getting a mortgage. Homeowner’s insurance is paid yearly, typically from an escrow account held by the lender, but you will pay it monthly as part of your mortgage premium.

Insurance Paid Through: At closing, you may be required to pay a certain amount of insurance paid through to a specific date.

Selling Broker Commission: The real estate broker will receive a commission based on a percentage of the home’s sale price. Most of the time, the broker fees are paid by the seller. But in some cases, the buyer may contribute some or all of the broker fees.

Buying Broker Commission: The buying broker commission will receive a share of the selling broker’s commission. In some cases, this commission may be negotiated and may also be the responsibility of the seller to pay.

Transfer Tax: Depending on the state you sell your home in, you may be required to pay a fee for transferring your property to another owner.

Closing Fees: Closing fees for the seller can encompass a few things, such as attorney fees, recording fees, and local government fees. The most significant part of closing fees will be the commission paid to the broker. A seller must be aware of all the closing fees they will pay to determine their actual home sale proceeds accurately.

Revenue Stamps: There may be cause to purchase city or state tax stamps as part of the closing process. These are stamps (usually an adhesive label) affixed to a document to indicate that certain taxes or fees must be collected.

Title Policy: You may be required to pay for the costs associated with issuing title insurance, which protects the lender and homeowner if someone attempts to claim the title at a future date.

Attorney’s Fees: In some states, only one closing attorney is required to handle the closing for both the buyer and the seller. In other states, the buyer and seller must have their closing attorney present. In either case, the buyer will pay attorney fees for preparing and recording the legal documents. Sometimes the payment of attorney fees can be negotiated between the buyer and seller.

Recording Fees: This fee covers the recording of certain documents with the official county records. In a real estate transaction, this typically serves to create a traceable chain of title. However, it will not necessarily help establish the property owner.

Repair Allowance: After a home inspection, the buyer may request that the seller make certain repairs to the home before the closing. The seller may instead attempt to negotiate a repair allowance, which is an amount they will grant the buyer to be used to make the repairs on their own after the closing.

Home Warranty: A home warranty differs from homeowner’s insurance in that the warranty can cover specific appliances or systems in a home, such as the electrical, plumbing, and major kitchen appliances. Home warranty fees can sometimes be wrapped into a mortgage or be paid directly to the home warranty company.

Survey: Some lenders may require you to have a survey performed before the closing to confirm the property’s boundary lines. The survey will also detail easements and other restrictions regarding the property. Even if the lender doesn’t require a survey, getting one is still a good idea.

Appraisal Fee: During the closing process, an appraisal of the home will often need to be performed to determine the home’s market value. Typically, the buyer pays the appraisal fee, which can be negotiated with the seller. The lender will usually require an appraisal, but it is still recommended to have one performed even if they don’t.

Termite Inspection: Sometimes, the lender may require you to get an inspection for termites or other pests that can infest a home.

Other Fee: Any additional fee required to be paid by the seller.

With the above information, you can use the calculator on this page to better calculate your proceeds from the sale of your home. The calculator can provide a detailed breakdown of all associated fees and earnings.

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