When Selling a Home Who Pays The Closing Costs

When selling a home, who pays the closing costs? 

Well, this isn’t a simple question to answer because it’s often based on regional customs or regional norms that are determined to be acceptable in that particular area. 

And I think that has to do, in part by the median price of the homes in the area. 

The higher the median price of homes the more closing cost the seller is willing to absorb versus if you’re in an area where homes are only $50,000 and the closing costs are $5,000 well, that’s a big chunk out of the proceeds of that sale so that might require the buyers to pay more of the closing costs. 

But with regard to Orange County, California. I’ll tell you what I find to be very typical. 

But before that, keep in mind that all closing costs, all terms of the entire contract, everything is negotiable so nothing is ever set in stone. Everything is negotiable. 

So you just have to decide what you want to allow when you are selling a home, as far as closing costs. But like I said,  in certain areas that it’s just done a certain way and when buyers or their agents are presenting offers and they’re explaining it to their buyers these are probably the terms that they are putting forth. 

So, the main closing costs involved, who pays for escrow? 

Well, when you choose an escrow company and again, choosing of the services is always negotiable, that cost in Orange County, California is split between the buyer and the seller. And the term that’s used often is “each pays their own”, or “50-50”. I prefer putting “each pays their own” and the reason is because sometimes the cost might be different from the seller’s side as it is from the buyer’s side. And so if they just each pay their own costs then they avoid having any arguments over who paid more. 

Title insurance, there’s always a title insurance policy transferred with a property or should be transferred with a property. If there’s not, then you’re looking for trouble. And that cost is almost always paid for by the seller and the reason is because they are conveying to the buyer that this house is, in fact, free and clear of any encumbrances or future claims of any kind. And so the seller is willing to pay that almost all the time? 

Another cost is the home warranty and almost always, the seller is willing to pay that. 

So as a listing agent, I can tell you that one of the things I almost always insist is that the seller pays for that home warranty. And the reason is because, you know when somebody’s buying a house they expect that everything’s working or at the time of the offer it’s working and in reasonable condition. And it almost never fails, two days after escrow closes the dishwasher blows up, or something like that. And so, instead of having them call you and say “Hey, you sold me a house that had a broken dishwasher!” and now they’re trying to squeeze five or eight hundred bucks outta ya’ for the upgrade on the dishwasher. The home warranty would take care of that. They just call the home warranty company and say “Hey, it’s not working.” They pay a service call fee and they come out they fix it or replace it and it’s done. It’s something that you don’t have to worry about. And I can tell you from my own experience I’ve had my heater replaced I’ve had my air conditoner replaced, I’ve had various appliances replaced over the years because I have the home warranty policy. And it’s just a good thing to be able to offer to those buyers a nice little incentive. 

As far as home inspection goes, the buyer always pays for that because it’s their home inspection. They’re the ones who are responsible for verifying all the details of the property before they close that sale. And so it would be silly of them to try to buy a house where they haven’t had somebody take a really good look at it. 

Now, if you’re a buyer and you’re thinking about skipping the home inspection almost always we insist that the buyers get that home inspection. It’s usually, three, four, five hundred dollars depending on the size of the house. But man it is worth it because now you get to know what things need to be worked on throughout time. But mostly what we’re looking for is is we’re looking for real safety issues we’re looking for structural issues or major systems issues. You know, the fact that there’s some paint peeling and a chipped tile and that sort of thing that’s all cosmetic and that comes with a used house. But when the inspector goes in and finds that there’s a significant leak under the house on a raised foundation or something like that that you didn’t know about or maybe the sellers didn’t know about then it has just saved you potentially thousands and thousands of dollars. 

Also, as a seller you might want to consider having an inspection done prior to putting that house on the market. We always suggest it and I would say about a third of the sellers we work with actually get the inspection done because they see the value in making sure that those things are disclosed up front. “Hey, look, we know that there’s a leak. But guess what, that’s how we’re selling the house. The house is being sold as is. We’ve disclosed it, you know about it Mr and Mrs. Buyer so make your offer accordingly.” 

Now, other costs that could come into play is title and tax, or transfer fees and that sort of thing are usually paid for by the seller here in Orange County, California. But again, all closing costs are negotiable. Every single thing is negotiable and it’s just become the norm in our area. 

If you go into a different area it’s going to be something completely different and they also have other things that they deal with that we don’t deal with here. Okay? So, it all applies. 

So, to get a clear picture of your costs when you sell, you need to have a good net sheet and that’s something that we could make for you. “Here’s what your costs are” including commissions and everything that come along with it so that you can say, “Okay, here’s our bottom line.” You now know what to expect and you’re not caught off guard. So, those are the majority of costs that are involved with the sale of the property.  

Above and beyond that you gotta figure in your moving cost and whether you’re buying another place moving into a rental, or moving out of state, renting trucks and things like that. So, factor all that stuff in you’ll have a good idea of what the sale of your house is going to cost you and then you can make good, educated decisions.