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If you’re a first-time home seller, you probably remember little about the closing process from the seller’s perspective because you were busy learning how to be a first-time homebuyer! But, you likely remember there’s a lot to know and prepare for on closing day.
Closing costs, escrow accounts, title search...remember those terms? They’re back, and there’s more to know this time around as the seller. First-time home sellers, check this list to get acquainted with the process. If you haven’t sold a home in several years, consider these steps as a refresher on what to expect during closing.
To help you learn or remember the real estate terms used on closing day, read our Home Selling Glossary.
Home Selling Beginning Steps
1) For a quick review, closing is the term given to the activities associated with buying and selling a house from the time an offer is accepted until the buyers and sellers exchange keys on the closing date. Most homes close between 30 and 45 days.
2) You’ll need to open an escrow account early in the home-selling process. An escrow account is a joint account into which both the buyer and seller deposit funds related to the transaction. A professional third party manages the account. Usually, your real estate agent takes care of opening the escrow account for you, but a For Sale By Owner requires the seller to open the account.
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Closing Costs and Fees
3) The closing process can be expensive. You’ll have a choice to pay for closing costs on the day of settlement or have it deducted from the home price. On average, closing costs fees are 3%-6%.
4) Until recently, it was expected for the seller to pay the buyer’s real estate agent’s commission. Since the NAR lawsuit in late 2023/early 2024, the buyer's commission split is not listed on the MLS listing. The buyer should be prepared to pay their agent's commission or negotiate it into the purchase contract.
“Sellers would still be free to offer a commission to be split between the seller’s agent and buyer’s agent, in what had been the established 5 to 6 percent commission split. Sellers offering a traditional commission split would be a powerful concession that would likely draw the most buyer interest and potentially more offers.” -Kristi Adams, What the NAR Controversy Means for You
5) Depending on the contract’s negotiations, the seller can pay the escrow fees but also split the costs between the buyer and seller. Your location dictates how much the escrow company charges for services, typically about 1-2% of the sale price.
6) In a traditional market, the seller should be prepared to pay most of these taxes and fees, but the buyers pick up some specific to their purchase.
- Title search. It ensures the seller is the outright owner of the property and there aren’t hidden claims or liens. In some cases, the homeowner may be unaware of outstanding issues. Depending on the depth of research needed, the search fees range from $150 to $1,000.
- Title insurance. Buyers obtain an insurance policy to protect themselves from real estate deals gone bad. If there’s a failure to find discrepancies with official documents such as county land records, tax liens on the federal or state level, or in bankruptcy court during the title search, the buyer has recourse. The policy also covers disparities found years later. Title insurance is a one-time fee.
- Fees owed on the property. You should account for delinquent utility payments, property taxes, homeowners insurance, and HOA fees. It's not uncommon for HOAs to require a payment to transfer to the next owner. It's possible that a portion of these fees can be prorated, depending on your scheduled closing date.
- Mortgage payoff and/or prepayment penalty. The closing process requires a paid mortgage for the property to transfer. Check in with your lender to determine the payoff amount and if they attach a penalty for early payment. The penalty could come in a percentage of the remaining amount owed or a fee determined by the year the loan originated. (Get more information in Mortgage 101: Your Basic Questions Answered.)
- Transfer taxes and recording fees. Local laws play a big part in how transfer fees and taxes add up. Transfer taxes are based on the value of the property and how the county/city taxes transactions. The county government typically determines the recording fees, which pay for the administrative tasks of filing the deed.
- Attorney fees. Individual states decide whether or not an attorney is required to process closing. While some charge a percentage of the sale price, others charge $150 to $500 an hour, depending on the complexity of the sale.
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Inspections and Seller Credits
7) Most buyers require a home inspection before closing on a home. If an inspection report comes back with issues, the buyer and seller must negotiate terms to correct the problems. Several solutions exist. The owners could reduce the sale price or make the improvements or corrections themselves. Home sellers must come through with the negotiated plans to complete the closing process.
Learn more: Why You Need a Home Inspection.
8) During the home inspection negotiations, the buyers may ask for specific certifications to ensure the health of the house. This includes the condition of the roof, termites, and/or sewer inspection. Certificates of proof are due at closing.
9) As the seller, you’re likely mandated by your state to submit a property disclosure report. This report identifies defects in the home that alter the house's value or challenge the safety requirements. Because each state writes its own procedures, the regulations are different, but the reports are usually due before closing.
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Closing Day
10) Military home selling from a distance couldn’t be easier today; the process has been streamlined over the years. Implementing e-signatures has cut down on the importance of your physical presence in the office. However, a long-distance closing requires a real estate agent who has multiple rounds of experience. They’ll guide the process, coordinate time zones if needed, direct any mailed documents to the correct recipients, and assist with wire transfers.
11) On closing day, if you choose to be there, you’ll need documents on hand to keep the process running smoothly. If you elect to pay for the closing costs outright, present a cashier’s check at the meeting. Also needed: a picture ID, a copy of the ratified sales contract, keys to the house, including doors, locked gates, and garage door openers. Keys are typically exchanged at closing, although the exchange can occur at a later time.
12) If you’ve offered your buyer credit toward closing costs (also known as a seller assist or seller concession), you’ll see those negotiated numbers in the sales contract at closing.
13) Closing escrow means the deal went well, and you will be on the receiving end of any profits left after closing fees and mortgage payouts. The hired escrow agent closes the account and handles the deed transfer to the new owner or lender.
Read What to Expect When You Close on a Home for more information.
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Savings on Closing Costs
Not everyone is eager to attempt it, but selling a home as a For Sale By Owner can help reduce certain fees. For sellers with plenty of time to clean, stage, and market their property, a FSBO could save you money that you’d spend on a listing agent.
But be cautious of working with a Dual Agent who offers discounted rates to work both sides of the sale. These individuals cannot serve the seller’s and buyer’s interests equally and are deemed illegal or restricted in some states.
If you consider a FSBO, check out our free ebook, For Sale By Owner: Is It an Option for You?.
15) It's possible to negotiate with your real estate agent for a lower commission rate, but you should bring up the subject early in the relationship and document the rate in your contract with the agent.
16) Discount brokers offer their services for lower percentages, but won’t provide a full-service experience that a standard real estate agent provides.
17) Most title, escrow, and settlement agencies set their own fees. By comparing prices of different offices in your area, you may find lower rates.
18) There’s a good possibility that, as a military home seller, you haven’t lived in your home for ten years. If not, you could be eligible for a title insurance reissue rate. If your title insurance policy covers more time than you have owned the house, you can request a reissue rate to save money.
Prepare yourself early for the closing process by choosing an experienced real estate agent. Read over explanations of terms and fees, and dig into your financial records to decide if you have enough cash upfront to pay for taxes and fees or if it's better to deduct them from the home's sale. Don’t forget to find out how many mortgage payments you have left.
On average, the time from listing your home until closing day takes about two months. Hot markets will move much faster, and slower markets won’t move as quickly. Regardless of the time, closing details remain the same.
By Dawn M. Smith
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