Mike Tom Realty

Closing Costs for Home Sellers Explained

by Michael Tom 02/06/2022

Photo by Burst from Pexels

In real estate, closing cost refers to the total amount of money due at time of purchase. This cost is usually equal to a small percentage of the total purchase price but can vary based on state, county and other factors. Sellers handle a portion of the closing costs which can sometimes be even higher than what the buyer pays. What exactly do sellers have to pay for at closing? Here are some of the most common costs to plan for:

Agent Commission

Real estate agents on both the buyer and seller side earn a commission in a home sale. The amount can depend on the market but it’s always split between the agents on either side of the transaction. In most cases, the seller is the one paying. This means that if you’re selling your home you should expect to pay out around 5% of the purchase price at closing unless you negotiate with the agents for lower commission rates. This is definitely the largest seller expense at closing.

Mortgage or Loan Payoff

In order to sell your home you need to pay off any remaining balance on your mortgage. Your budget should include funds to cover the remaining balance and any prorated interest. Some lenders also charge a fee for early payoff or pre-payment, so it’s important to investigate that ahead of time to avoid unpleasant surprises. Go over the terms of your loan carefully so you’re prepared.


There are a couple of tax expenses sellers should prepare for, including property tax. If you have not paid your property taxes in advance, you’ll need to budget for the prorated amount through the date of the sale. Another tax expense for sellers is title transfer tax, in which your local or state government will charge a fee for switching the title over to the buyer. You should also know about capital gains tax if you’re making a significant profit on the sale. Typically, this is only something investors need to worry about, but homeowners have the same rules. Consult a financial advisor or tax attorney to confirm your situation.


Don’t forget that you’ll need to pay off your utility bills on the home when you sell it. Even if you haven’t been living in it, you’ve probably had the electricity, water and other utilities active throughout the selling process. This cost should be simple to budget for, however. You can use your monthly bills as a guide to estimate how much you’ll owe for utilities at time of closing. Check to see if there are any additional fees related to equipment or early termination of contracts so you can factor them into your budget as well.

There are lots of other miscellaneous expenses that make up closing costs for sellers. The above are the most common, but you might also have costs specific to your situation. Planning for and identifying all the potential costs before closing day will help make your home sale as smooth as possible for everyone involved.

About the Author

Michael Tom

Consultant for Life
Good Deed Best Interest

"Fate has brought you here today....Time for you to control your Destiny"

Balancing Heaven, Earth and Human interactions using Real Estate

"Land is the source of all wealth", Adam Smith