Just when you thought you were about to get extra money from your home sale, here comes commission price, title insurance, transfer taxes, and concessions, all saying “Hi!” and reminding you not to be excited too much yet. As much as selling one’s own property is a means of getting money for use in other more important things like medical expenses, relocation, etc., it does come with a cost.
And yes, in many states and countries around the world, there are mandatory fees to be paid by the home seller and the home buyer. Usually, for the home seller, the most basic is the Deed Transfer Tax. There’s also the commission price if you’re selling through an agent. A seller’s agent and a buyer’s agent each receive separate commissions, and it’s not all the time that buyers agree to pay your (the seller’s) real estate agent.
So, if you’re hesitant about telling your buyer directly that they’ll need to shoulder the closing costs, here are some things you can do to soften the blow of closing costs.
Raise the Sale Price
If your home still has a mortgage and you’re planning on selling it, you have two options:
- Pay the remaining balance in full
- Have your buyer continue the mortgage
In both instances, the equity you receive is basically the difference between the purchase price and your outstanding mortgage balance. Closing costs like commission, taxes, and concessions are often deducted from the equity. After that, what remains will be the net profit from your home sale.
While the recommended sale price is often based on your home’s fair market value, you have to be wise about your price. It is possible to sell your home higher than its market value, especially when it’s a hot seller’s market. Seller’s Market means that there are more buyers than the number of houses being sold, stimulating a bidding war.
In Atlanta, around 32.9% of homes in 2022 have sold above the list price, and this has increased year after year. So yes, it is possible to raise your sale price above the average market price to offset your closing costs.
Sell Your Home By Yourself (so no commission)
If raising the price isn’t a wise strategy for now, you can also cut on selling costs by selling the house yourself. In the real estate world, we call that FSBO. FSBO is when a homeowner sells their house off-market and without an agent, a broker, or a realtor. You’ll need to put more effort, though, and it’s doable even amongst very busy homeowners.
This isn’t 100% avoiding closing costs, but it will save you a huge chunk of money and more potential stress from getting the wrong real estate agent.
For a sample calculation, supposing your home’s market value and the purchase price is $139,000, and your outstanding mortgage balance is around $107,000. That means you have $32,000 to spend on closing costs, as well as repairs/upgrades if you wish to do so. Then supposing your real estate agent is asking for 6% of the purchase price as commission. That’s about $8,340. So now you only have $23,660 left to spend on taxes, repairs, inspections, transfer fees, concessions, and more.
Imagine if you didn’t have to pay for the $8,340. You’ll have extra money for your relocation and other expenses you have!
Find a Good Real Estate Agent or Broker
What does “good” mean anyway? If you were to do a poll, the majority would probably say that a good real estate agent is someone who can sell a home fast. While that is true, we’d also like to emphasize that a good real estate agent is someone who can execute your best interests at heart — including reducing closing costs as much as they can. Agents who can carry this out successfully are those who really have the talent for negotiation. And to score this kind of agent, “test” their skills first before hiring them.
Find a Discount Broker
If this is your first time hearing about a discount broker, a discount broker is someone who connects home sellers to real estate agents who have lower commission rates. Yes, there are agents who accept lower commissions in exchange for more clients. This doesn’t cancel out all your closing costs as well, but it will save you 2%-4% of costs.
The disadvantage of discount agents/brokers, on the other hand, is that they may not be as available as you’d want them to be. Because they’re handling multiple clients at once, you’ll have to adjust more to their schedule.
Avoiding closing costs, whether fully or partially, is not impossible. Connect with us at HomeSold GA, and we’ll help you sell your house and reduce your closing costs as much as we can. You can reach us at 770-668-4888 or send us a message through the form below!