Most sellers hope to make money when they sell their homes. You may be making major life decisions based on what you expect to earn on closing day. Maybe you will use the proceeds for a downpayment on a new home, to pay for your child’s college tuition, or to go on the vacation of your dreams. Regardless of what you plan to use your proceeds for, it’s imperative that you are aware of the costs involved in selling a home and go into the process with eyes wide open to what your actual earnings will be.
I’m a big believer in transparency and provide each of my sellers with a “net sheet” before we list their home. The net sheet shows what I expect their home will sell for, any costs and potential reimbursements they can expect to incur, and therefore the actual amount of money they can expect to earn on closing day.
So, what are all the costs involved in selling your home? The cost of selling a home depends on your market, but since I sell in Baltimore City and Baltimore County, I’m going to provide you with a Baltimore-specific breakdown that you can use to get an idea of what you can expect to earn.
I’ve been in the Baltimore real estate industry since 2008. I specialize in representing sellers in the Greater Baltimore Area. I’m in favor of transparency and managing expectations. Before we list your home, I will provide a detailed breakdown of what you can expect to earn on closing day. I’ll make any tweaks necessary and provide you with an updated breakdown before you accept any offer so you can make plans for your proceeds!
Broker Commissions
Historically, in Maryland, when a seller lists a property, the seller agrees to pay the listing broker between 5%-6% of the sales price as a commission. The listing agreement will outline if the seller’s brokerage will cooperate with other brokerages to find a buyer and if so, how that commission will be divided among the parties.
You will also want to check the listing agreement to see if there is an admin fee being charged to you in addition to the commission cost. Admin fees are common and typically cover the brokerage’s administrative functions for handling your file. They usually range from $250-$750. Note : in 2024 there was a commission settlement that may result in what commonplace commission structures look like starting in August 2024. We can discuss this when you decide to list your home.
Transfer & Recordation Taxes
Transfer and recordation taxes are charged by the county in which the property is sold. Additionally, there is a state transfer tax when a property is sold.
In Baltimore City, the total cost of transfer and recordation charges for selling a property is 3%. Unless otherwise agreed upon in the Contract of Sale, these costs are split equally between the buyer and seller. Thus, if you are selling a property in Baltimore City you can expect to pay 1.5% of the sales price in total transfer and recordation taxes.
In Baltimore County, the total cost of transfer and recordation charges for selling a property is 2.5%, unless otherwise agreed upon in the Contract of Sale. These costs are typically split equally between the buyer and seller. Thus, if you are selling a property in Baltimore County, you can expect to pay 1.25% of the sales price in total transfer and recordation taxes.
Water Bill
You’ll be expected to pay your water bill in full at or before closing. You can look up your current water bill online.
Water Bill Escrow
When you sell your property, you will be in the middle of a billing cycle for your water and sewer usage. An escrow will be withheld from you at closing to cover the cost of the impending water bill. Then, once the water bill is available, the closing company will prorate it based on the days you owned the property versus the days the buyer took possession. The closing company will pay your portion out of your escrow and then send any remaining funds to you. The amount of the escrow withheld at closing is usually a little bit more than your recent water bill.
Property Tax Proration
When you sell your property, you are required to pay the property taxes, current through the date of sale. You can look up your property taxes online. If you have not paid your property taxes yet you will be charged a prorated amount through the date of closing. Simply take the amount of the total annual bill and divide it by 365 days in a year to get the daily rate. Then count the days from the start of the billing cycle, which is July 1 until your closing date. If that’s 45 days for example, take the daily rate x 45 to determine the amount owed at closing.
If you have already paid your property taxes in full for the entire year, you will still determine the daily rate and then count the days from the date of closing through the end of the billing cycle, which is June 30. If that’s 200 days, for example, take the daily rate x 200 to determine the amount reimbursed to you at closing.
Title Costs
When you sell your property, the buyer selects the title company that they want to use. That company makes sure that the property is transferable and provides title insurance. As a seller, the cost that will be charged to you from the title company should be limited to procuring a loan payoff and a wiring fee. When you sell with me, I include a document in your contract with the buyer that limits your title cost to $325 : $275 to procure the loan payoff and $50 wiring fee.
Liens
Liens against the property will have to be paid at or before closing. The most common type of lien is a mortgage. Don’t use the loan balance on your mortgage statement as the payoff amount. Most lenders assess some fees associated with the payoff of the loan. Call your lender and ask for an official payoff quote to determine how much will be collected from you at closing to pay off your mortgage.
Citations
If you received a citation from Baltimore City or Baltimore County, that has not been paid, this will also need to be paid at or before closing. Call the office in your jurisdiction to determine the amount owed now.
Potential Other Costs
Note, the above costs are associated with the transfer of property. You may incur other costs in the process of selling your home. Below are a list of costs that you may agree to pay in order to get your home ready to go on the market or in negotiating with a prospective buyer.
Repairs
Landscaping
Cleaning
Staging furniture
Concessions to help the buyer with their closing costs
Repairs negotiated with the buyer at the inspection phase
Know Before You List
Nothing takes the wind out of a seller's sails like a misunderstanding of what will be earned on closing day. Before we list your home, I will always give you a detailed breakdown of what I expect you will earn. Since each offer from a buyer will contain different terms and conditions, I will present you with an updated offer-specific net sheet when you receive an offer, prior to your acceptance of the offer, so you are crystal clear on what you can expect to pocket if you accept that offer and get to the closing table. Transparency is everything!
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