When you first think about buying or selling a house, you think purely of the major transaction of paying for the home or getting paid. It’s only once you really think about the process that you realize just how much buying or selling has the potential to cost you.
Closing costs are an area of real estate transactions that most people feel confused about, even if they’ve owned a few homes in their lifetime. There are a few different costs you should be aware of and who pays them isn’t always clear.
Buyers and sellers have their own costs to pay, so let’s break it down:
Sellers in Massachusetts usually pay 3-6% of the sale price in closing fees, including the cost of their realtor. The realtor fees are the biggest cost in any house sale for a seller, as they usually charge 2-6%. The exact percentage varies depending on your area, the house price, and what they include in their services. The average in Massachusetts is 4.16%.
That means if you were to sell a $500,000 home, you would pay $20,800 to your realtor.
(We’ll cover ways to avoid this below – and it doesn’t involve trying to sell the property to potential buyers yourself!)
Closing costs are the fees associated with securing a mortgage before a house sale (or while remortgaging). These costs are usually 3-5% of your purchase price and include:
- Loan origination fees: these are fees for the process of underwriting and processing the mortgage, and are usually 0.5-1% of the loan total.
- Appraisal and survey fees: your lender requires an appraisal to confirm the property is worth more than the mortgage amount. Unless you need additional surveys, these costs are usually around $300.
- Title insurance: You need title insurance to protect you against financial loss if there is a problem with the title.
- Homeowners’ insurance: You usually need to pay for the first year at closing to get your mortgage.
- Mortgage insurance: This is optional if your down payment is over 20%, but is compulsory if your down payment is less than that. Private mortgage insurance will cover the lender if you default on the loan.
- Property taxes: You usually pay for 6 months of property taxes upfront at closing.
- Closing fees: 1-2% of the purchase price must be paid to your escrow agent.
- Attorney fees: An attorney is required to be present at closing in Massachusetts. These fees are usually $800 – $1,500.
Normally, both buyer and seller are responsible for paying their own closing costs. Since both buyer and seller have made their own decision about how to sell or buy a home, they should be responsible for their own costs.
That said, sellers will sometimes contribute to a buyer’s closing costs. This has become less common in recent years as the market has been so competitive, and buyers have been paying high prices for properties, but it can and does happen.
In some cases, the seller will pay all the closing costs, but it does depend on the circumstances surrounding the purchase. There needs to be a good incentive for the seller to consider paying a buyer’s closing costs, especially because they’re likely already paying 2-5% of their sale to a realtor. You need to negotiate either party paying for the other party’s costs early in the sale process.
Sellers in Massachusetts pay an average of 0.7% of the home sale price in closing fees, not including realtor fees. Usually, the only thing you need to pay besides your realtor fees is your real estate attorney fees and other fees related to the process of selling, which are unavoidable. This includes:
- Title service fees and real estate attorney fees (around $800)
- Owner’s title insurance (this is a buyer expense, but it is common for the seller to pay this in Massachusetts, so you may or may not need to pay this)
- Transfer tax (about 0.46% of your sale price, but note that some counties and cities have an additional transfer tax, so your tax percentage may be higher)
- Recording fees (about $50)
- Property taxes (you need to pay to be up to date with your property taxes – this will vary in cost depending on where you live)
There can be other fees if you live in an HOA or are paying off your mortgage early, but this list of fees should give you a good idea of what to expect.
At the time of writing, the market is starting to cool off a little after a period of incredible competition and high bids by buyers for the most desirable homes in sought-after locations. If the market where you live is still like this, you may be able to negotiate for your buyer to pay some or all of your your fees.
In a poor market, you’re unlikely to get any of your seller fees covered by your buyer, and some even give buyer incentives to try and entice buyers, which can be paying some or all of the buyer’s fees.
If you want to avoid paying the 2-6% charged by a realtor, you’ll need to think about how to avoid using a realtor. In a traditional sale, this isn’t really possible, but if you sell in a private sale, there’s no need to get a realtor involved.
We buy homes for cash in Massachusetts and so selling your home to us means you can avoid those high realtor fees that can be a huge drain on your post-sale finances. We buy homes in “as-is” condition, which means you also won’t have to worry about having to make any costly repairs for your buyer.
The process is simple – just let us know a few details about your home and we’ll send you or best cash offer upfront, so you don’t have to worry about negotiating a higher price. You’re under no obligation to accept, but if you do, we can complete the sale in just 2-3 weeks.