What Are The Transaction Costs When Selling
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What Are The Transaction Costs When Selling

No matter what you buy or sell, there are usually transaction costs (also called closing costs). When you buy/sell stock, you pay a broker's fee. When you buy/sell a car there are licensing fees, taxes, and other charges. Real estate is no different, except that the transaction costs involved are often much higher than for most other items.
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No matter what you buy or sell, there are usually transaction costs (also called closing costs). When you buy/sell stock, you pay a broker's fee. When you buy/sell a car there are licensing fees, taxes, and other charges. Real estate is no different, except that the transaction costs involved are often much higher than for most other items. (An exception could be a rarity such as a painting, where auction houses sometimes charge the buyers and the sellers each as much as 20 percent of the sales figure.)

What are the transaction costs when selling?

The seller's transaction costs are similar to the buyer's with two significant differences. First, there are usually no loan fees, unless a lender charges something such as a pre-payment penalty for paying off the mortgage early. Second, unless the seller sells entirely "by owner," there's a commission. Here are some of the costs you can expect to pay when reselling an investment property:

  • Seller's Agent's Commission: The commission is usually based on the value of the property and is completely negotiable. Most agents ask 6 percent for full-service selling of a home, 10 percent for bare land, and anywhere from 5 to 10 percent for commercial/industrial property. Industry sources indicate that the actual full-service commission paid on residential property is closer to 4 1/2 to 5 percent in U.S. If you sell the property "by owner," you may nevertheless want to pay a buyer's agent a commission for finding a buyer for you. This typically amounts to half a full-service commission, so if that is 6 percent, this would amount to 3 percent. Discount brokers are available nationwide and most offer full-service commissions at 4 to 5 percent. There are also some fee-for-service agents who charge a set amount per service offered. For example, it might cost $500 for them to provide a purchase agreement.
  • Title Insurance and Escrow: These are typically split between buyer and seller, although in some locales the buyer pays all of one and the seller all of the other, and in other locales, buyer or seller pays all of the fees.
  • Broker's Transaction Fee: This is usually considered a "garbage fee." It is added on by the realty company, not the agent you're dealing with. In residential properties it has been running from $350 to $650. It compensates the agency for its costs in doing business.
  • Seller's Attorney and Other Incidental Costs: If you use an attorney, you'll have this fee. Incidental costs can be anything from having documents sent to you by express service to having them copied and notarized.

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