One of the many questions real estate agents get is do sellers pay closing costs. Another question is who pays closing costs a buyer or a seller.
Most people realize buyers have closing costs, but not nearly as many realize a seller pays closing costs too.
First-time sellers are often surprised when they discover some of the home selling expenses. Closing costs can be a significant expense for a seller. They can take a big chunk out of the profit from the sale.
Nobody likes financial surprises. They seem to come at the worst time and can lead to significant frustration. Closing costs for a seller can be tens of thousands of dollars. Not chump change by any means.
We will cover all of the closing costs for a seller in Massachusetts, so you don't have any of these miserable surprises. Let's dive in.
The Real Estate Commission
If you are like most homeowners, you are going to pay a real estate agent to sell your home. Having been in the real estate industry for the past thirty-five-plus years, I can tell you it's worth it.
While it is possible to sell a home without a real estate agent, the chances of netting more money, even without paying a Realtor's commission, are slim.
One of the most significant benefits of hiring a real estate agent is the exposure they will bring to your home. Getting the most money for any property is about having more eyeballs which leads to showings. It's one of the significant things a skilled real estate agent will provide.
The commission you will pay varies. Commission rates are not fixed, although there are some rough percentages you can expect to pay.
Most real estate agents will charge somewhere between 5-6 percent of the home's sales price. The commission is typically split 50/50 between the listing and selling agents.
Each agent works for a real estate broker who will also get a percentage of the commission. Many new real estate agents typically split the real estate commission with the brokerage.
More seasoned agents usually retain a higher percentage of the real estate commission. Let's see a quick example of what you might pay to sell your home.
Commission Example For Selling a Home
If you sell a home for $600,000 and there is a 5 percent commission, you will pay $30,000. The agent you've hired will not be putting 30,000 into their pocket. Not even close.
It will generally be split four ways unless single agent dual agency occurs. By the way, I would avoid dual agency at all costs.
So, in the above example, the listing brokerage would get $15,000, and the selling brokerage would get $15,000. How the money is divided up from there will depend on the split agreement between the broker and agent.
The real estate commission will be the largest seller's closing cost by far.
Massachusetts Tax Stamps
When you are selling your home in Massachusetts, you will pay a tax for doing so. There is a reason so many people call it Taxachusetts. This home selling fee is referred to as tax stamps.
In most areas of Massachusetts, you will pay $4.56 per thousand of the sales price. So, for example, if you sell your home for $500,000, you will pay $4.56 x 500 = $2280.
It should be noted that in Barnstable County, you will pay $6.48 per thousand. The Massachusetts Tax Stamps are almost always one of the biggest surprises for a home seller.
Most people who have never sold a home are shocked that this is a closing cost for a seller. One of the things I always do with potential home sellers is cover their expected expenses, so there are no surprises.
You hear stories of homeowners who were not informed about seller closing costs from their agents all the time. Real Estate taxes are a significant selling expense, so not one that should be missed.
Hiring a Real Estate Attorney
Massachusetts is an attorney state. Typically, title companies are not involved like they are in other states. One of the roles of a real estate attorney is to represent both buyers and sellers.
When representing a seller, a real estate attorney will negotiate a purchase and sale agreement on the seller's behalf. Massachusetts is a two-contract state with an offer to purchase that lays out the basic terms and a purchase and sale agreement that is far more comprehensive.
Real Estate attorneys typically get involved at the P&S stage. The purchase and sale will be negotiated between the buyer's attorney and the seller's attorney.
The attorney will do everything to protect the seller's best interests in the sale. It is well worth the money charged. The attorney will also attend the closing on the seller's behalf. Rarely does a seller ever attend a closing anymore.
The buyer, not the seller, does most of the paperwork being signed, so it makes little sense for a seller to sit around and watch.
What you will pay a real estate attorney to negotiate the P&S and attend the closing will vary. You can expect to pay somewhere between $700-$1200. As you get closer to the city of Boston, the fees tend to increase.
Miscellaneous Closing Costs For a Seller in Massachusetts
Some other smaller fees you can expect to pay are associated with selling a home. They include the following:
- Smoke/Carbon Monoxide detector certificate - in Massachusetts, a seller is obligated by law to provide the buyer with passing smoke and carbon monoxide detectors in the home. The city or town fire department will check them before closing. You can expect to pay between $25-$50 for the certificate.
- Title V inspection - if a septic system serves your home, you will need to have it inspected. The inspection cost will run somewhere between a ballpark of $800-$1200.
- Prepare a new deed - one of the responsibilities of a seller is to provide a new deed for the property. Most attorneys will charge around $150 for a new deed to be prepared.
Final Thoughts on Seller Closing Costs
Understanding what you will pay in expenses to sell a home is essential. Nobody likes surprises when they take money out of our pockets. Remember that your home selling expenses are generally deductible and can help bring down any capital gains taxes that may be owed. Not taking this into account could cost you a severe amount of money.
Hopefully, you now have a much better understanding of the Massachusetts seller closing costs. You should now be able to calculate the seller's closing costs on your property.