Real estate can be an incredibly lucrative investment, and when ready to sell, whether it’s a primary residence or an investment property, knowing exactly what you’re up against and how to determine the bottom line means there’ll be no hidden surprises when it comes down to what you actually make off the sale of your home. Closing costs in California can vary, but in general, California homeowners can expect to pay anywhere from 6 to 10 percent of their home’s selling price to close the deal.
Factoring in closing costs – the additional costs outside of normal realtor commissions – is an important step in the process. There’s more to it than just subtracting your loan balance from the agreed upon purchase price. Typically, as long as your home has built up equity (meaning, it’s worth more than what you paid for it), most sellers don’t have to come up with cash to cover the costs listed below. If you’re upside down on your home (meaning it’s worth less than the initial purchase price, then in all likelihood, it’s going to cost you to sell it.
Small fees and costs add up quick. What, exactly are the average closing costs for sellers in California? From the commission paid to the listing agent, to escrow fees to city or county transfer fees, when it comes to seller closing costs in California, homeowners need to know what to expect before listing.
Listing agent commission
As the seller, you pay the listing agent commission if you use a listing agent to sell your home. The cost is generally 3% of the total home sale. However, commissions are negotiable, so don’t be afraid to talk to your agent about his or her fees. And, don’t worry about having to write a hefty commission check as commissions are usually paid from the proceeds of the sale of the house.
For Sale By Owner (FSBO) fees
After the housing crash in 2008, For Sale by Owner (FSBO) became increasingly popular as buyers and sellers alike tried to recover from the fallout of bad loans and an inflated housing market.
It’s still a popular option – the seller pays a fee to have his or her listing advertised on the MLS and MLS-powered sites like Realtor.com and Redfin, but can save tremendously on agent commissions. In most circumstances, this fee is only paid when sellers to sell without an agent. The actual cost can vary, depending on the services used, but it’s typically anywhere from $299 to 2% of total sale price. See the three most common FSBO options compared here.
Buyer’s agent commission
Sellers are also responsible for paying buyer’s agent fees. This fee is optional by law, but offering less than the traditional 2.5 to 3% commission is frowned upon by buyer agents, and will often result in your listing being passed over.
This fee compensates the escrow agent, who coordinates the transfer of title and cash. Escrow agents also hold the property being sold in trust during the “escrow process,” while the sale is being finalized and all inspections are made and resolutions are agreed upon. Escrow fees commonly run about $2 per thousand dollars of the sale price, plus $200 – $250. Check out the escrow timeline in California.
Title search fees
The title search fee pays for a document that proves you have a legal right to sell your home and insures the buyer if you don’t. The search fee can run from $250 – $800 and will depend on what county your property is in.
Mortgage balance payoff
At the close of escrow, before receiving any proceeds on the sale of the house, the remaining amount owed on your mortgage will be paid off to the lender. The mortgage balance payoff is the cost of repaying your home loan. It’s important to note that this cost can also include a loan payoff fee, which will vary by lender and may include a prepayment penalty fee if outlined in your mortgage.
Closing cost concessions
Some buyers ask a seller to cover their closing costs. If you agree to this request, you will pay their fees, which could be in the range of up to about 3% of the purchase price.
City or county transfer fees
The total cost of city or county transfer fees will vary by location, and in some areas, there are no transfer fees.
Miscellaneous Seller Closing Costs in California
In addition to the above, fairly standard closing costs for sellers in California, there are some other miscellaneous costs and fees associated with selling a home. Not all of these will apply to you, but you should understand what these costs are before you get into the process.
Standard in most legal processes, notary fees are paid to a notary to verify your identity and ensure proper execution of paperwork.
Home Owner’s Association (HOA) transfer fee
An HOA transfer fee only applies if the property you’re selling has an HOA. It’s usually paid for by the seller, and will include a fee to cover document preparation and to register the new buyer as the property owner. HOA transfer fees are typically less than $1,000.
Cost of home warranty
A home warranty is a common closing concession provided by the seller for the buyer. The price varies based on location and warranty company and can range anywhere from $250 to $1,000.
Termite inspection fee
A termite inspection fee is common in California and may be required depending on property location and the type of loan a buyer is using. A termite inspection fee usually costs around $100. Depending on the inspection results, subsequent repairs can be anywhere between $1,000 and $5,000.
Natural Hazard Disclosure Report
This is a commonly ordered report that details natural hazards or threats in your area, such as earthquake fault lines and flood zones. The report often includes other nuisances such as airplane noise. The disclosure will likely cost around $125.
Lien release document fee
If a court judgment resulted in a lien on your property for an unpaid debt, you’ll need to repay it before your sale can close. A lien release document (also known as a Release of Lien or a Lien Cancellation) stating any lien against the your property has been paid will likely be required. You will probably also have to pay a recording fee on the document showing your debt has been paid in full.
The Bottom Line
Some homeowners find that selling a house can be stressful. The cost of selling a house in California can be a bit of a shock to anyone who hasn’t gone through the process before. There are a lot of moving pieces, but knowing what to expect and how to calculate your bottom line at the very end can help eliminate some of that stress. Remember, there is more to it than just subtracting your mortgage from your sale price. As a seller, you may be required to cover the costs of lender payoff fees, commissions, property taxes and more. It pays to be informed.
If you’re thinking about putting your house on the market, and are wondering just how much closing costs are for sellers in California, you should learn about all options before committing to an agent. Real estate can be a smart investment, and if you’re really smart about it, you could walk away with a nice nest egg to reinvest in a new property or other investments to the benefit of your overall financial well-being.
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