Closing Costs When Selling A Home In Nashville
The cost of selling a home in Nashville will vary greatly depending on many factors. Far and away, the most expensive closing cost associated with selling a home is the commission. The state of Tennessee does not regulate commissions. They are entirely negotiable. Depending on the language in the purchase contract, there are many other fees involved. Let’s discuss each separately,
What is title insurance? It’s an insurance policy that guards lenders and new owners against undisclosed liens that may be found in the future. The insurance issuer will either pay the claim or settle the claim in court.
Who pays for title insurance? Like everything in a purchase contract; it’s negotiable. It also varies by area. For this discussion, let’s focus on Davidson County. The second page of the Tennessee Association of Realtors Purchase and Sale Agreement is left blank on this matter. The buyer agent, when drafting an offer, will need to fill in the blank on who pays the cost of the title. When purchasing a new construction home, a short sale home, or a bank-owned home, it’s almost always expected that the buyer will cover the cost of title insurance. Historically it has been commonplace for buyers to ask the seller to cover the cost of title insurance when purchasing a pre-owned home. However, the swift pace of the current Nashville market has seen a change in this tradition. If the listing is brand new to the market and you are involved in a multiple offer situation, you may see buyers offer to cover the cost of their own policy in an attempt to make their offer more attractive. It’s also possible to offer to split the final cost.
It is important to remember that at its heart, this is a cost that benefits the future buyer. Because of this, sellers are sometimes loath to pay it. Title insurance is an underwriting requirement whenever a loan is involved. If the buyer were paying all cash for the home, it would be an elected option, one that I always recommend as a protection to your investment.
How much is it? The cost of title insurance is state regulated mathematical calculation, but there are many factors that go into determining it. What type of policy are you getting? Is there an accompanying owner’s policy to go along with the lender’s policy? Does the seller have proof of a recently issued policy? One that is less than 10 years old? If so, a small discount may be available.
Attorney & Escrow Closing Fees
Depending on the amount of work that goes into it, a local title company will generally charge somewhere between $450 and $650 to close on a house. It is not uncommon for the buyer and seller to close at two different venues. Each party is responsible for their own escrow fee.
Tax and Other Prorations
Even if you are already paying your taxes on a monthly installment with your mortgage company, the closing company will go ahead and collect your portion of the tax bill on the closing settlement statement and send it to the city. You will be mailed a refund of the already-collected taxes now sitting in your escrow account a few weeks after the mortgage is paid off.
Monthly and Quarterly HOA dues will also be prorated.
Your Final Month of Mortgage Interest
Many folks fail to realize that when they make a mortgage payment, that payment is being paid in arrears for the month you were just in the home. It is unlike rent which typically paid at the beginning of the month for future days. Image that it is late-April and your home is on the market. You receive an offer and the buyer wants to close on June 12th. You will still be responsible for making your May 1st and June 1st regular mortgage payments. On the settlement statement the closing company will also collect twelve days of interest to be sent along with your mortgage balance as your total loan payoff. So this number will vary depending on the day you close.
A one year home warranty, depending on the type of policy, will generally run from $400-$700. They are third-party policies that can offset the cost of *some* repairs that could arise during the normal course of ownership and maintenance. Some sellers offer warranties as an incentive. Some buyers ask for a warranty in negotiations.
In our area, the buyer generally covers the cost of the termite inspection during their due diligence period. The exception is when the buyer is obtaining a VA Loan. The government has mandated that the seller should provide a clear letter in this case. The cost of a termite inspection should run less than $100. If bugs are found and treatment is required, there are additional fees that will be incurred by the seller.
The commission for both listing broker and buyer broker is generally paid by the seller. The amount of commission is negotiable, but a common industry norm is six percent of the sales price. In our area that is likely to be broken down as 3% to the listing company and 3% to the selling company. This fee is payable upon sale and withdrawn from the seller’s proceeds at settlement. We do things a little bit differently here at Brokers Cooperative. Email me ask about our commission plan.
Other Normal Fees
Here are other regular and nominal fees that you may see.
- Wire Fee – Your bank may change an incoming or outgoing wire fee.
- Courier Fees – To get the documents to and from attorneys and downtown for recording
- Power Of Attorney – If one of your signing parties can’t be present, a PoA may be issued. If you have already relocated out of the area, a PoA will likely be much cheaper than returning to town.
- Payoff Fees – Some lenders and loan servicers may charge a fee for issuing payoff info.
- Transfer Fees – Many homeowner associations charge transfer fees.
- Transaction Fees – Some brokerages will collect additional marketing fees or brokerage fees. At Brokers Cooperative we never charge additional fees beyond commission.
Buyer Costs and Pre-Paids
The buyer has an entire set of additional fees that are covered in a separate blog post. The buyer is generally responsible for the cost associated with their loan (appraisal, tax service fee, flood certification, underwriting fees, application fees, credit check, etc.)
In addition, they will cover the cost of inspections during their due diligence period.
They may also have pre-paid fees that are required to be collected at settlement. This could include a year’s worth of homeowners insurance, HOA set up fees and several months of tax reserve.
It is possible for the buyer to negotiate for seller assistance with these fees. There are no rules or laws forbidding this. However, there are rules forbidding a seller from participating in the funding of a buyer’s down-payment.
Be Sure To Ask For An Estimated Net Sheet From Your Realtor
I understand that some agents don’t feel comfortable creating costs sheets for their sellers. This is something we always offer. It is just an estimate and NOT based on an official loan payoff. Here is a sample Net Sheet for the following scenario:
Sales Price: $410,000
Mortgage Balance: $290,000
Closing: August 24th
Concessions: Seller-paid title + Home warranty
Total Commission: 5.5%
Thinking of Selling Your Home In Nashville?
Next up you may want to have a look here and review my thoughts on smart pricing here. You can also review all of our 300+ sales transactions on our Zillow profile page. We also have a couple dozen verified client testimonials there.
Of course, you can always call Steph at 615-554-3745 or send us a quick email.
Happy Home Selling 🙂