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Hidden costs you should know about

Published: Oct 14, 2009

One of the worst things that can happen to you as a seller is to walk away from closing with less than what you expected. As most homeowners need the proceeds of their sale to fund other major purchases, like a replacement home, every nickel counts. So how can you be sure you don't face any hidden surprises on the day of closing? The first step to avoid a financial fleecing is to request an estimated net sheet from your real estate professional prior to accepting an offer. While not exact it should provide a fairly clear picture of how the chips will fall at closing. Some of the items to carefully review include:

  1. Commissions

    Real estate agents are required to disclose their fees in writing, but if you have negotiated a lower rate or there have been some unexpected expenses with the sale, this amount could rise. Be sure to review the commission amount on the closing statement for any errors.

  2. Property taxes

    If you are closing your transaction at a time that is close to the same time you typically pay your annual property tax premium, be sure to bring a receipt to the escrow officer so you don't pay the tax twice. While you would no doubt receive a refund for the balance, it may take weeks or months to extract it from the taxing authority.

  3. Title insurance

    If you purchased or refinanced your home within the last two years, it's likely that you may qualify for a discount on your title insurance premium. If you are being charged the full premium, be sure to request a re-issue rate.

  4. Buyer closing costs

    If you have agreed to pay for closing costs on behalf of the buyer, place a limit on how much you can be charged. Without a cap this can amount to a blank check allowing the lender to charge fees they may typically have waived if the buyer were paying the closing costs.

  5. Transfer fees

    In many states and local municipalities a transfer tax is charged when a home is sold. Be sure you are clear about the amount that will be charged and the formula for how this is calculated.

  6. Notary and document preparation fees

    The escrow company charges fees to prepare the closing documents. To be sure they are competitive with other escrow companies in the area, put on your detective cap and make a few calls to their competitors. This is especially true if the closing will be handled by an out of area firm, an attorney, or even a local real estate broker.

  7. Refunds

    Don't forget about your refunds! These could include money being held by your lender to pay for annual tax and insurance payments (often referred to as impound accounts). While they are often credited in your final payoff, sometimes they aren't. Also talk to all of your service providers, from phone service providers to power companies, about any deposits which you may have coming back.

When you arrive at closing be sure to bring along your estimated closing statement. By comparing your first estimate with the actual closing statement you can often discover ways to save a few dollars just by asking some simple questions.

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