What Are Closing Costs?
Closing costs are costs that are due when a real estate transaction closes. This happens when the property title officially transfers from the seller to the buyer. Both the buyer and the seller are responsible for certain closing costs. In a seller’s market, a seller may be able to negotiate for the buyer to pay more of the closing costs. An experienced real estate attorney can advise you about negotiating these costs.
Typical Seller Closing Costs
Below are the typical closing costs Washington state sellers encounter when selling their homes. An experienced real estate lawyer will be able to explain these in detail and advise you of other possible costs associated with the sale of your Tacoma home.
Real Estate Agent Commissions
Hiring a real estate agent is one of the most common expenses for home sellers. A real estate agent lists, shows, and helps sell a home. A real estate agent is licensed but must work for a licensed real estate broker or a brokerage firm. A seller can also hire a real estate broker as their real estate agent.
A seller is generally responsible for paying a real estate agent’s commission when they sell their home. Realtors charge a percentage of the home’s sales price for their commission. Thus, a home that sells for a larger amount will result in larger realtor commissions.
Various platforms report that Washington state’s average realtor commission is 5.17%of the home sales price. However, not all of that money goes solely to your listing agent. The commission is split between the seller’s agent, seller’s broker, buyer’s agent, and buyer’s broker.
Washington’s Real Estate Excise Tax
Another considerable expense a home seller faces upon selling their home is Washington’s Real Estate Excise Tax(REET). The REET is a tax for transferring the home’s property title and deeds to the buyer. The REET tax amount is based on your home’s sale price.
The REET in Washington is:
- 1.1% on homes selling for less than $500,000,
- 1.28% on that portion of the sales price between $500,000 and $1,500,000,
- 2.75% on that portion of the sales price between $1,500,000 and $3,000,000, and
- 3% on that portion of the sales price exceeding $3,000,000.
Washington’s REET is a sliding-scale percentage depending on the sale price of your home. Each county also has a local excise tax that will be added to the total.
Title Search Fee
A title search fee pays for a title company to research the validity of your home’s title. They’ll search property records to determine if there are any liens or claims against the title. The title search fee can vary, and it’s best to get quotes from various title search companies for the best price.
Title Insurance Owner’s Policy
Title insurance protects the title of the home. Essentially, it provides protection just in case problems arise with the title or title defects. For example, if someone sues the homeowner claiming that they still have partial ownership rights to the home, title insurance provides the homeowner with financial coverage. Title insurance typically covers liens, taxes, and even claims under wills.
An owner’s title insurance policy specifically protects the homeowner’s equity in the home. Typically the seller pays for this policy. However, the seller can negotiate for the buyer to cover this cost.
As with any insurance policy, the seller should get quotes for the best rate and coverage. Like with everything else, the cost of a title insurance policy depends primarily on the home’s sale price. Some platforms state that the average national cost of title insurance is about $1,000 per policy, but that varies by state and locality. Sellers should get multiple quotes for title insurance and select the rate that works the best for them.
Pro-Rated Property Taxes
You may be on the hook for a certain portion of the property tax when you sell your home. Property taxes in Washington State for 2022 are due in April and October. So let’s say that you sell your home in February 2022. The new owner is responsible for paying the property taxes in April 2022. This covers a portion of the time that you owned the property. Thus, when you sell your home, you will be responsible for paying the buyer your share of the property taxes for when you still owned the property.
Mortgage Pay-Off and Reconveyance Fees
You will need to pay off your mortgage when you close if your property is subject to a mortgage. Once the seller pays off the mortgage, they will receive a reconveyance deed. A reconveyance deed is proof that the mortgage company has transferred the property’s title to the borrower. Then, the seller will have to record the reconveyance deed with the county recorder’s office. In Pierce County, reconveyance filing fees are $203.50 for the first page. These costs are all typically included in your mortgage pay-off amount.
A buyer demonstrates that they are acting in good faith and can purchase a home if certain conditions are met by depositing money with a third party. This third party is an escrow account. The cost of setting up an escrow account is typically split between the buyer and seller.
Speak with Our Lawyer for Your Tacoma Home Sale
Selling a home can be complicated and costly. If you have questions about the estimated closing costs of the sale of a home in Tacoma, Washington, you should speak with the experienced real estate attorneys at Bolan Law Group. We have over 50 years of experience handling legal matters in Washington, including real estate transactions in Tacoma. Contact us today.