One of the greatest concerns for homeowners, when they sell is closing costs. If you’re a Massachusetts homeowner and listing your home for sale, you’ll need to how much your closing costs will be to budget for. Costs that sellers and buyers incur during a real estate transaction are closing costs and vary considerably.
Sellers in Massachusetts have closing costs between 2% and 4% of their home’s total sales price. Keep in mind that real estate commission is an additional 6% of the total sale price and does not include closing costs.
Here’s everything you need to know about closing costs in Massachusetts in 2021.
What are Closing Costs?
The last step of a real estate sales transaction is the closing, where both the buyer and the seller have met all the sales conditions, and the transfer of the property’s legal ownership can occur. In simpler terms, closing day is when all the required legal documents are signed, and there’s an exchange of money.
Under Massachusetts law, a real estate attorney must oversee residential real estate closings, although other real estate professionals can assist the process.
Closing costs include all the expenses such as inspection fees or taxes.
How Much are Closing Costs in Massachusetts?
Closing costs are usually between 2% and 4% of the total sales price in Massachusetts. As of March 2021, the median home value in Massachusetts is $490,712, meaning seller closing costs are $9,814 to $19,628.
Buyers and sellers have varying closing costs. A buyer’s closing cost gets influenced by their financing choice and includes the appraisal cost and loan origination fee. In contrast, a seller pays less closing costs but does need to account for real estate commissions on closing day on top of other selling costs.
How do You Calculate Closing Costs in Massachusetts?
To calculate a seller’s closing costs, you need to determine how much you’ll have to pay in-state transfer taxes. Sellers are responsible for real estate transfer tax when they sell their property, and the rates are the same throughout Massachusetts county, except Barnstable.
Sellers should set money aside for a transfer tax of $4.56 per $1,000 of their home’s sale price on the deed. If we use the example of the median home value in Massachusetts of $490,712, the transfer tax amount will be $2,234.
To estimate the rest of your closing costs, consult with your real estate attorney, as it’s more challenging to estimate the rest.
Keep in mind there’s also an additional 6% commission payable on closing day for the real estate agent. On a median value home, that would be $29,442 coming from the sale proceeds.
What do Closing Costs Include?
Closing costs can vary, and it’s negotiable who pays what. A buyer can ask the seller to credit some of the closing costs as a part of the sales agreement. Should this occur, be mindful of the closing costs, so you don’t pay more than you expected to pay.
In Massachusetts, the real estate transfer tax gets calculated at $4.56 per $1,000 increment of the deed. With the median home value being $490,712, the transfer tax amounts to $2,234.
Local towns or cities in Massachusetts set property taxes, but you can expect rates of between 1% and 2%. The national average effective tax rate is 1.08%, whereas the state’s average is higher at 1.22%.
Title insurance gets calculated incrementally based on your home’s sale price and can vary significantly. The cost of title insurance will be higher if your property’s value is high.
Title Search ($300 – $600)
Most lenders assess the property’s title to confirm the legal owner whether any outstanding liens need to get settled.
Mortgage Payoff and Prepayment Penalty (If Applicable)
The outstanding loan balance is, for most sellers, due at the time of closing. A prepayment penalty needs consideration as some loan terms include this payment into the closing costs.
Ask your lender to confirm if you have a prepayment penalty clause if you’re unsure.
Your closing cost budget should include additional costs, such as utility bills or HOA dues.
Additional Home Selling Costs in Massachusetts
If your house is older, or you have competition between sellers in your area, a seller can negotiate and benefit from offering a home warranty to buyers. A home warranty can cost between $243 and $1,702 but expect to pay more if your house is large with many appliances.
A termite inspection can cost up to $280 and gets paid by the seller on behalf of the buyer.
A closing cost that sellers need to consider is the real estate agent’s commission, which is 6% of the sales price. The buyer’s agent and the listing agent both receive 3%.
Who Should Pay for the Buyer’s Closing Costs?
It’s beneficial to the seller to contribute to the buyer’s closing costs, especially in a seller’s market. By covering some of the closing costs, the buyer can possibly make a higher offer for your property.
Another consideration is to offer the buyer credit should they find defects in your home that need repairs during the inspection. This saves you from getting the repairs done yourself and ensures the buyer doesn’t walk away from the sale.
Pay No Closing Costs if You Sell Your Home for Cash to Us!
If you want to sell your home and avoid paying closing costs, then consider selling your home for cash. You don’t pay closing costs if you sell your home to us – we will take on the cost for you!
We buy homes for cash in Massachusetts, no matter what condition your home is in.
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