How Much Does it Cost to Sell a House?

Exterior of house with for sale sign
Jupiterimages/Stockbyte/Getty Images

Question: How Much Does it Cost to Sell a House?

Buyer's agents insert the costs a seller will pay into the purchase contract. Supposedly, the buyer and the agent have discussed which fees they would like the seller to pay, but more often than not, the buyer's agent makes that decision without consulting the buyer. And buyers don't know any better.

Sellers should also clarify with their agent which fees are customary and which are not.

A reader asks: "My agent sent us an offer that has all kinds of fees associated with it that we are worried about. There are things like title insurance and documentary transfer tax that the buyer wants us to pay. Aren't these kinds of fees negotiable? Why can't the buyer pay for title insurance, since I understand the title insurance is primarily for the buyer's benefit? I don't understand why we should have to pay anything to sell a house. Where can I find out how much does it cost to sell a house?"

Answer: I can see where it might be confusing to understand how much it might cost you to sell a house. After all, if you sell your car, you don't pay for the new buyer's insurance or title registration or taxes. The buyer hands you the cash and you sign the title. But selling a home is very different, and there are costs of sale involved.

How much it costs to sell a house depends on:

  • Local custom

For the most part, all real estate is negotiable. That means the costs of sale in the purchase contract are also negotiable. But if most sellers in your town, for example, are willing to pay for, say, transfer tax, and you don't want to pay that tax, it might be enough to turn the buyer away.


Customary Types of Costs to Sell a Home

In California, for example, documentary transfer tax is calculated on 55 cents per $500 of sales price. That would equal $330 for a $300,000 home. It might not seem like a lot of money in comparison to the sales price, but for a buyer it adds up. I suspect one reason so many fees are typically paid for by the seller is because the buyer already pays a lot of closing costs just to obtain a loan. Maybe the idea is the seller is the person with typically the most money?

The largest fee will most likely be the real estate commission. This is a place where some sellers try to scrimp and probably should not. If a seller hires the right agent, that agent will most likely earn her fee back and then some through her handling of the transaction. The National Association of REALTORS routinely conducts surveys that show sellers earn about 20% more by hiring a REALTOR® over selling a home by owner.

Tip: don't lose an aggressive listing agent because you are apart by 1% or so of the commission. That 1% or so you don't want to pay could turn into 10% or more of the purchase price you may lose because you hired the wrong agent.

Other types of customary fees, which are customary in California and could vary from county to county, and most likely vary from state to state are:

  • City transfer taxes
  • Delivery or courier
  • Document preparation
  • Escrow
  • HOA docs and transfers
  • Home Warranty
  • Loan tie-in
  • Loan payoffs and beneficiary demands
  • Property taxes
  • Recording
  • Title insurance for owner's policy
  • Pest inspections and pest completions
  • Wire

Government-Mandated Costs to Sell a House

There are many home disclosures a seller needs to provide. While the California Civil Code does not state that a seller must pay for a Natural Hazard Disclosure, for example, it does require a seller to disclose natural hazards to the buyer. The best way to satisfy that particular requirement is to buy a natural hazard disclosure for around $100. I argue this point with short sale negotiators who don't want to authorize this payment and win that argument because I send them the California Civil Code.

Types of government-mandated costs to sell a house will vary from state to state and county to county and city to city.

Some cities require sellers to pay for and submit to a buyer a city inspection report. Sellers might be required to install safety devices such as smoke alarms or carbon monoxide detectors or even a water diversion device that prevents backups at a garden hose. The best person to ask is your real estate agent.

Be careful in California. A law effective January 2017 requires all homes to be outfitted with water saving devices. If sellers sign a purchase contract agreeing to comply with government mandated retrofits, they could find themselves having to replace the dishwasher, all of the toilets, shower heads and water faucets throughout the house. If sellers do not agree to comply with government mandated retrofits, they are not required to do anything more than disclose.

The Bearing of Markets on Costs to Sell a House

In a seller's market, for example, you may be able to demand that a buyer pick up more of the closing costs than a buyer would normally pay, simply because you might have multiple buyers who want to buy your home. When the appraisal is an issue in a multiple-offer situation, meaning a buyer cannot offer more than market value because a) if may not appraise and b) the buyer might not have the cash to bridge the difference, offering to pay more of the seller's closing costs than one is customarily required to do can make a buyer's offer more attractive to a seller.

The opposite is true in a buyer's market. In a buyer's market, a seller might offer to pay some of the buyer's closing costs to make a home more attractive to a buyer to purchase. In a neutral market, it might not much matter.

Tip: When it comes time to review a purchase offer, ask your agent to give you an estimated net sheet based on that particular offer.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.