When it comes time to sell your house, you may be surprised that there are a lot of fees and taxes that are required before you can collect your proceeds. Before any you sign any closing documents to your real estate transaction, you should take a look at the estimated closing statement (provided by your escrow company). This sheet will give you an overview of any loans being paid off, taxes, title/escrow fees and everything in between. My goal is to highlight some of the more common expenses when selling real property so you can have a better idea of what to expect on closing day. In no particular order, here are some common line items you will see on the closing statement:
- Mortgages – If you have a mortgage on your house, this will be required to be paid off upon the sale. Any and all costs associated with paying back this borrowed money will be reflected here.
- Other Liens – Any sort of back taxes, mechanic’s liens or anything else that was “attached” to your house will need to be paid off in the sale as well. “Attached” in this case means that someone took the time to go down to the county courthouse to file a lien against you. If you lose a court case where money is owed, this amount could be attached to your house as well. In Oakland, repeatedly missing payments for your garbage collection will result in a lien against your house for the unpaid balance – something I’ve had to deal with on more than one occasion.
- Escrow Fees – These are fees the escrow company (or lawyer in some states) will charge you to handle the transaction. An escrow company is a neutral 3rd party who handles all of the logistics and money involved in a sale of real estate. Escrow fees are based upon a percentage of the transaction’s value. I did a deep-dive into escrow companies in another post.
- Title Insurance – Title insurance at it’s most basic is insuring the buyer and seller that the proper chain of title has been followed. This ensures that the buyer will be able to take title to the property free of any encumbrances, liens, etc. While it’s quite rare that a title defect is found, the money is well spent to protect yourself from losing hundreds of thousands of dollars. Title insurance costs can vary depending on the certifications that are wanted/needed. These are also a percentage of the overall transaction.
- Notary – Notaries are a witness to the transaction and preform many fruad-preventing acts. One of the most important is ensuring proper identification of every individual who is part of the transaction. These fees are usually quite small, usually around $50 – $150.
- Recording – In order to record the new deed of trust with the county, you have to pay to file the paperwork. The escrow company will handle this legwork for you. In Alameda County the cost to record a new deed of trust is $15 for the first page and $3 per additional page.
- Property Tax – Property taxes in California are due in November and February. Each payment is for a 6-month period. Except on the rare occasion when you close on the first day of the new 6-month cycle, you will either owe or get a credit back for property taxes. This tax can vary depending on the value of the property and any local, special assessments (school improvements, bonds, etc.).
- County & City Transfer Taxes – These taxes are required when buying/selling real property in the Bay Area and are imposed by the city and county where the property is located. The amount varies between each county and city. You can check out a handy reference sheet here. I also did an overview of transfer taxes in another post with an example.
This is meant to be a general overview of common expenses you will have when selling a house in the Bay Area. For 96% of transactions, this will be all you need to know, but there are always the outliers that make things a bit more complicated. If you have thought about selling your house, but were afraid of all the costs/fees associated with doing so, I hope I could shed some light on what to expect. Except the transfer taxes, these fees will generally add up to less than $5,000 which isn’t too bad considering the cost of real estate in our area. As always, if you have any questions or comments, please feel free to reach out to me directly.