Most sellers think about the sale price. What they do not always think about is what comes out of it before they see a dollar.
There are two separate categories of expenses every seller should understand before they list. Closing costs and commission. They are different things and lumping them together is where most of the confusion comes from.
Closing costs
Closing costs in the strict sense are the fees associated with transferring ownership of the property. In Indiana on a typical home under $250,000 a seller should expect to pay roughly $1,200 to $1,500 in closing related expenses. Here is what that generally includes.
Your side of the closing fee. The title company charges a fee to conduct the closing and coordinate the transaction. In Indiana that fee is typically split between buyer and seller though like most things in real estate it is negotiable and can be written either way in the contract.
Owner’s title insurance. Indiana sellers typically pay for the owner’s title insurance policy which protects the buyer against any title defects that might surface after closing. On a $200,000 home this runs roughly $600 to $750.
Deed preparation. A small fee, usually around $50, to prepare the deed and transfer documents.
Tax proration. Indiana collects property taxes in arrears which means at closing you will owe a credit to the buyer for the portion of the current tax year that you owned the home. The amount varies depending on your closing date and your local tax rate but it shows up on every seller’s statement.
Recording fees and miscellaneous title charges. A few small line items that together add up to a couple hundred dollars.
That is it. Closing costs on their own are not the number that surprises sellers.
Commission
Commission is separate from closing costs. It is the largest single expense in most transactions and it is a contractual fee paid to the agents involved in the sale.
In Indiana the total commission on a typical transaction runs around 5% to 6% of the sale price split between the listing agent and the buyer’s agent. On a $205,000 home that is approximately $10,250 to $12,300 depending on what was negotiated.
Commission is not a closing cost but it does come out of your proceeds at the closing table which is why sellers need to understand both numbers going in.
What the total actually looks like
On real transactions in Fort Wayne closing costs and commission together have been running about 6% to 7% of the sale price. On a $205,000 home that has meant roughly $14,000 in total debits before the seller walks away with their proceeds.
That number changes depending on your mortgage payoff, your tax proration timing, and what concessions if any you agree to pay toward the buyer’s closing costs.
The concessions conversation
In the under $500,000 price range in Fort Wayne buyers will often ask the seller to contribute toward their closing costs. This is not unusual and it is not automatically a problem. Buyers working with certain loan programs have limits on how much cash they can bring to closing and a seller contribution can make the financing work.
What matters is understanding the full picture of the offer before you respond. A buyer asking for $5,000 in concessions attached to a strong price, clean terms, and solid financing may net you more money than a buyer offering slightly less with no concessions. The math is not always obvious and that is exactly why the conversation about any offer requires someone who knows how to read what is actually on the table.
What you should do before you list
Before the sign goes in the yard you should know your real number. Not just what you hope to sell for but what you will actually walk away with after closing costs, commission, your mortgage payoff, and any concessions you might reasonably expect to offer.
That conversation should happen at the beginning of the process not at the closing table when the numbers are already set.
I have been doing this in Fort Wayne for twelve years. I walk through the net proceeds with every seller before we agree on anything because knowing your real number is not a closing day surprise. It is the foundation of a good decision.
If you want to understand what your number actually looks like before you decide whether selling makes sense, call me.
David Barlag
Fort Wayne Realtor, Century 21 Bradley Realty
260-750-5737
davidbarlag.com