By: Rick Davis
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Common Expenses When Selling a Home
When getting ready to sell your home, one of the most important considerations is much money you will receive from the sale. Therefore, it is important to understand the common expenses you will likely encounter when selling your home. This post will discuss some of those common expenses and help you to calculate the final amount you will receive from the sale of your home.
Real Estate Taxes: When selling a home, it is common for the seller to be responsible for the property taxes that are owed for the period of time when the seller owned the home. Therefore, if the taxes were paid through December 31st of last year and the home is sold on March 1st, the amount paid by the buyer will be reduced by an amount equal to the prorated portion of the taxes due from January 1st through March 1st when the buyer takes possession of the property.
Homeowner’s Association Dues: HOA or COA dues are generally handled in the same fashion as real estate taxes. As such, the purchase price will be reduced by an amount equal to the prorated portion of the HOA dues through the date the buyer takes possession of the property.
Title Insurance: Title insurance is an agreement in which the issuing company agrees to pay for litigation costs related to defending the purchaser’s interest in the property and/or to compensate the buyer if someone else is successful in proving they own the property. There are two primary types of Title Insurance — an Owner’s Policy and a Lender’s Policy. The Lender’s Policy will protect the buyer’s bank and the Owner’s Policy protects the buyer. It is customary in this area of the seller to pay for a Owner’s Policy and the buyer will pay for any lender’s policy.
Closing Costs/Attorneys Fees: Whether your close your home purchase with a Real Estate Attorney or with Title Company, there will be a fee charged for the handling of the transaction. These fees can be paid by the Seller, Buyer, or split between the parties based on the agreement between the parties.
Home Warranty: A home warranty is an agreement with a company to provide repairs of certain mechanical systems and appliances within the property. A home warranty is not required as part of a sale, but may be offered as a way to increase interest in the property. Moreover, a home warranty is particularly effective when the property is older or has characteristics which make it more likely to require repairs or maintenance. If a seller offers to purchase a home warranty for the property, it will be paid for out of the proceeds from the sale of the home and prior to the seller receiving payment.
Other Closing Costs: Generally speaking the buyer is responsible for other closing costs, such as appraisal fees, inspection fees, mortgage application fees, points, and other costs related to obtaining a loan. With at that being said, a seller can agree to pay some or all of these costs as a way of encouraging buyers to purchase the property. If you agree to pay closing costs for the buyer, these costs will reduce the total amount you will receive at that closing.
This post covered the majority of negotiation points to consider when making an offer to purchase a home, but as stated above everything is negotiable. Therefore, if there is something unique about your purchase, feel free to include it in your offer. Moreover, the more unique your purchase offer, the more I would recommend engaging the services of a real estate attorney. Although real estate agents are excellent at preparing contracts for standard sales, they often lack the legal knowledge to prepare documents for more complicated transactions. By using a real estate attorney, you can ensure your interests are fully protected and the contract is performed as you desire.