The 8% to 10% of the home’s price that accounts for the seller’s portion of the closing costs is made up of various administrative and sales-related fees. All of these fees differ depending on where you live.
Agent commission. About 6% of the seller’s closing costs go toward commissions. The seller typically pays not only their own listing agent’s commission but the commission for the buyer’s agent too. On average, this amounts to about 3% of the house’s final sales price to each of the agents for a total of 6%.
Title Fees. In some states, title fees, also called transfer taxes are administrative charges to pass the house’s title from the seller to buyer. Missouri is one of the few states that does not enforce a real estate transfer tax.
Title Insurance. Title insurance protects the buyer in case there are any liens or disputes about the house’s title. Even though this is for the benefit of the buyer, the seller typically pays this one-time cost.
Escrow Fee. An escrow account is a third-party account that holds all of the money until the transaction is complete and the property changes hands. Escrow fees may be charged as a flat fee or about 1% of the home sale. They’re comprised of various banking and office expenses such as notaries, copying documents, and fund transfer fees. Escrow fees are usually split equally by the buyer and seller.
Prorated Property Taxes. The seller must pay property taxes for the period of time from the last tax payment until the closing date. For example, if they occupy the house for six months of the new tax year, they are liable for half of the annual tax bill. This amount is due at closing. After that, the new owner takes over the tax burden.
Prepayment Penalties. The seller’s mortgage might contain a clause against paying off the mortgage before its term. This penalty is due at closing along with the mortgage payoff amount.
Prorated HOA Fees. In neighborhoods with Homeowners Associations, sellers may need to pay prorated dues. Just like property taxes, payment is required for the number of days the house was occupied by the seller. Some associations charge a transfer fee too, to switch membership to the new owner.
Credit Toward Closing Costs. Sometimes a seller will offer to pay some portion of the buyer’s closing costs as an incentive to complete the sale. Those amounts or percentages are due at the time of closing.