Who Pays What Closing Costs When Selling House by Owner (FSBO)?

Seller closing costs average 8% to 10% of the sales price. But how much does the seller pay if they’re selling the house themselves?

Sorry to say the closing costs you pay at an agent-assisted sale are the same if you sell FSBO, with the exception of the real estate agent commission.

Who pays what at closing can depend on your location but more so on how negotiations with the buyer go. Real estate agents help sellers and buyers get the best deal, so each party pays a fair dollar amount. But if you have no representation, and the buyer does, you need to know what you’re doing, so you don’t end up paying a larger portion of the real estate closing costs.

What are the Seller Closing Costs?

What follows are the common closing costs a seller typically pays when finalizing a home sale.

Buyer’s Agent Commission (~3%)

What? But the whole reason for selling FSBO is to save money on commission fees. Sorry. The truth hurts, and we don’t like saying it, but the seller is responsible for the buyer’s agent fees.

If you had a seller agent, you’d pay a 6% commission that would then be split between the seller and buyer agents (3% each). Since you are selling FSBO and do not have representation, you’ll pay the seller’s agent 3% of the sale price.

So let’s say you sold your house for $200,000. You would end up paying the buyer’s agent $6,000, which is still better than if you had representation too, in which case you’d dole out $12,000.

When You Know the Buyer

57% of FSBO sellers know their buyers, so neither party needs representation. Instead, you’ll each hire a real estate attorney to handle the necessary paperwork at the closing table. This way, you can save the 3% and put that money back in your pocket.

When You Need to Find a Buyer

If you do not have a buyer lined up, and you don’t want a seller agent to help you find buyers, you can still benefit from paying a real estate agent a flat commission fee to list your property in the MLS. 

Potential buyers will find your house For Sale By Owner and have their buyer agent contact you to schedule tours. A good buyer agent will have already secured a pre-approval document from the buyers, indicating how much they can afford, which also serves your best interests.

When getting offers from regular home buyers, always ask for their mortgage pre-approval document.

Why do Buyer Agents Want a Fee?

Homeowners who sell by owner (FSBO) often have no concept of the responsibilities they are assuming and can make costly mistakes. You will have to do the common tasks of a listing agent, who knows where to list, how to list, how to boost your property appeal, perform market analysis, and market to find you qualifying buyers and filter out looky-loos.

On the other side, the buyer’s agent wants compensation for bringing their buyer(s) to you. They help arrange showings and qualify the buyer, and since there’s not a seller agent, they often shoulder more responsibility, getting parties to the finish line.

Think of the buyer’s agent commission as your way of saying “thank you” for their efforts. You can pay them the 3% (or whatever percentage is normal for your area), a flat fee, or reduced fee (if they accept).

Pre-Listing Appraisal ($400-$600)

A real estate agent conducts a comparative market analysis and pulls comparable properties to help you determine a fair asking price. Since FSBO sellers do not have access to these helpful resources, flying solo and all, they need to find another way to accurately price their house for sale.

Pricing a property wrong can cost you buyers or dollars. If you price it too high, it’ll likely sit on the market till you bring the price down, and if you price it too low, you may lose out on more money.

A pre-listing appraisal (or pre-listing inspection) is when you hire a professional home inspector to identify potential repairs and estimate the value of your property. This way, you’ll have an idea of the repairs a buyer might ask for and can address them before you list.

Seller’s Attorney Fees ($150-$350 per hour)

FSBO sales warrant legal and professional oversight to avoid legal snafus. A real estate attorney prepares and reviews documentation, including the purchase agreement, mortgage contract, title papers, transfer documents, and necessary disclosures, to make sure everything is legally sound and correct.

Transfer Taxes (0.01%-4%)

Transfer taxes are incurred when you transfer ownership of the title of a property to another party. It’s essentially a transaction fee charged by state AND local governments when real estate changes hands. Transfer taxes are calculated based on the sale price of the house and the tax rate for the state, county, and city you live in.

13 states do NOT charge a transfer tax: Alaska, Idaho, Indiana, Louisiana, Kansas, Mississippi, Missouri, Montana, New Mexico, North Dakota, Texas, Utah, Wyoming.

Property Survey Fees ($300-$800)

Also known as a boundary survey, a property survey is a precise, professional measurement of a plot of land a house is built on. Property surveys are important when building additions, because you need to know the property lines.

Unless you have a recent copy, you’ll need to pay a surveyor to create a property (or land) survey. The survey will serve as a legal documentation of the topography and boundaries of the property and be part of the record of sale.

What are the Buyer’s Closing Costs?

The average closing costs for a buyer are 2% to 5% of the loan amount. So what does the buyer pay for at closing that the seller does not?

Loan Origination and Processing Fees (1%-3% of the Loan)

Loan origination and processing fees are essentially the lender’s fee for the preparation and evaluation of a buyer’s mortgage.

Buyer’s Attorney Fees ($150-$350 per hour)

Should a buyer not have a real estate agent, they need some form of legal representation to help them with the necessary paperwork without assuming legal risk.

Third-Party Appraisal ($400-$600)

If the buyer is taking out a mortgage, the lender will require an up-to-date appraisal to assess the value of the property versus the requested loan amount. This way, the lender will decide if they’ll lend out the money.

Professional Home Inspection ($300-$500)

More often than not, a potential buyer is going to hire a home inspector to check the condition of the property and uncover necessary repairs or improvements. A typical inspection includes the foundation, roof, plumbing, electrical system, HVAC, and other systems, plus any water damage, mold, or evidence of termites.

Recording Fees (varies)

Recording fees are charged by the county to make the purchase of a property a matter of public record. Recording documents include the sale price of the property, number of pages and documents, and the mortgage value. The cost varies by county and sometimes depends on the size of the document.

Negotiable or Split Fees

You may be able to negotiate or split additional closing fees with the buyer before closing day. Again, without representation, you’ll have to look out for your best interests but also make an attractive deal for the buyer.

Seller Concessions or Closing Cost Credits (varies)

A seller concession is a closing cost you (the seller) agree to pay. Why would you do this? To sweeten the deal and entice buyers to make an offer, of course. Also, in some states some concessions are customary. For example, in Texas, house sellers often pay for a year of the home warranty.

Another example: let’s say you need to sell your house fast, and you want to avoid repairs. You might lower your asking price to make up the difference in repairs, which the buyer will then pay out of pocket post sale. Keep in mind though, this only applies to minor repairs that the buyer’s lender doesn’t deem necessary for the buyer’s mortgage approval.

If a lender requires extensive repairs, you really only have two options at that point: (1) make the repairs or (2) sell to a cash buyer who purchases houses As Is.

Seller concessions may also include a couple months of HOA fees, or making a monetary contribution towards buyer closing costs or escrow fees.

Settlement Fees ($800-$2,000)

The title company, escrow company, or real estate attorneys charge a handling fee for final paperwork and distribution of funds to the appropriate parties. Settlement fees cover costs associated with closing costs, including title search fees and loan origination fees, plus any expenses that are in excess of what a person pays to sell or buy a property. The numbers vary by loan amount, property value, and city.

Property Taxes (varies)

You (the seller) need to settle all property taxes accrued during your time owning the house up to the date of closing. The buyer will assume responsibility for property taxes after the closing date.

It’s not uncommon to prorate (or split) the property tax bill by a portion of time, such as by the number of days (for the portion of the tax year) a homeowner owned (or will own) the property, between the buyer and seller.

Title Fees (1%)

Title fees encompass a number of items, including:

Title Search ($75-$100)

A title search discovers any discrepancies with the ownership of a property. For example, it might uncover outstanding liens or a claim on the property. Maybe the seller is not the legal owner, or they share the title with a sibling, as can be the case with an inherited property. A real estate transaction cannot be completed without a clean title.

Owner’s Title Policy (0.05%-1%)

The owner’s title insurance policy protects the homeowner in the rare case a valid claim against the property comes up which the title search missed. It’s not unusual for the seller to put up a one-time payment for the owner’s title insurance.

Lender’s Title Policy (0.05%-1%)

A lender’s title insurance policy protects the lender should a title defect be discovered. Lender’s title insurance is often required to get a mortgage loan, but it does not protect the buyer’s investment in the property (their equity) – that’s what the owner’s title insurance does.

Skip Paying Closing Costs and Repairs When You Sell to a Cash Buyer

Rather than deal with closing fees or the usual stress of a sale by owner, consider instead selling to a real estate investor. Most investors pay cash for a property “as-is”, so your house can be damaged, in need of repair, or mid-renovation. 

Their offer will deduct repair costs, since the investor fixes up the house on their dime, BUT STILL you’ll be saving money. How?

• First, because they pay cash, an investor does not need mortgage financing;
• Second, an investor does not require an appraisal nor an inspection, so you can go straight to closing; and
• Third, most investors cover both buyer and seller closing costs and additional sale fees, and don’t ask for or expect any concessions, putting money back in your pocket for moving costs.

Finally, neither you nor the investor needs representation, so there will be no real estate agent commissions.