Expert: liznarr - 9/17/2008

Question
We are listing our property in TX for sale.  We just got the list of fees and are
kind of dumbstruck.  In addition to the standard 6% brokerage fee, there are
all sorts of other incidentals that really add up.  They are suggesting listing
the house at just under $175K (not too bad since we got it for $140K).   
But the brokerage fee is $10,494 and another $10K in incidentals, like  
Property Tax, Title Insurance, Recording Fee, Tax certificate Fee,  
Escrow fee, Funding/closure Fee, Messenger & Courier Fee, Underwriting  
Fee, Home Warranty, Buyer Assistance (which is a whopping $3K), and  
some more fees.  We don't know if this is all standard or not.  Is  
$20K in fees reasonable for a $175K home?  Any light you can shed on  
this would be very helpful.  Thanks so much ...

Answer
Hi Stephanie,

I apologize for the delay in responding.  I just realized this morning that two questions came in at the All Experts’ site the same day yours did, and I somehow missed yours.  I do hope this has not caused a problem for you.

When an individual sells property, there are always fees that a Seller will be responsible for paying whether a real estate agency is used, or not.  The only exception to this is when a Purchaser might agree to pay all the Seller’s fees, as in the case of a very low agreed-on purchase price.

When a real estate company is used, fees for the real estate company are “in addition to” the usual fees a Seller would pay.  

I’m going to give you some typical closing fees in SC where I live and work which will hopefully give you a benchmark for comparison:

The following are generally always a SELLER’S obligation:

1.   Brokerage fee, when property was listed with a real estate company.
2.   Recording fees, but ONLY fees to record/satisfy the Seller’s mortgage which will be paid off.
3.   Express mail charges to pay off any mortgage.  (Lenders do not stop the interest clock on a mortgage balance until the full payoff is in their hands; thus, the reason pay offs are almost always sent by express mail to the lender.)
4.   Deed prep (for the closing agent to deed the property to the new owner.)
5.   Fees to a City, State and/or County, based on the sales price of property.  In SC, these fees can be referred to as “deed stamps” or “Seller’s recording fees.”
6.   Unpaid water/sewer bills.
7.   Payoff of any unpaid liens/judgments.

The following are generally ALWAYS  PRORATED at closing:

1.   Property Tax.  In SC, real property taxes are paid in arrears, so a Seller pays taxes at closing from January 1st through the day of closing.
2.   Homeowner association fees.
3.   Any other fees specific to the property paid in advance by the Seller and which will transfer to the Purchaser, such as garbage pickup and sewer charges.

The following are generally ALWAYS a PURCHASER’S obligation at closing:

1.   Home inspection by purchaser.
2.   Recording fees for the purchaser’s deed, mortgage and plat

3.   All lender fees, including, but not limited to:
a.   Credit report
b.   Underwriting Fees
c.   Title insurance (to cover the new mortgage)
d.   Escrow Fees
e.   Any funding fees charged by lender.
f.   Discount and/or origination points.
g.   Appraisal

4.   Owner’s title policy, if owner’s coverage is requested.
5.   Closing Fees charged by the closing attorney or Title Company.
6.   Survey
7.   Homeowner Insurance

The following are generally always NEGOTIABLE charges:

1.   A home warranty fee.  Either Seller or Purchaser can agree to pay for this, if asked for.
2.   Termite/water damage letter.
3.   Heating/air conditioning letter.

The BUYER ASSISTANCE you mentioned for $3,000.00 baffles me.  Ask your listing agent if this amount could be the sum total you “MIGHT” be asked to pay on behalf of a purchaser for his closing costs.  If it is an additional charge by your listing agent for his services, I would say that is ridiculous since the brokerage fee should cover ALL his services.  And, of course, if a DIFFERENT brokerage company sells your house, the 6% brokerage fee you are paying is generally split equally between the two companies.

As additional information, if a Purchaser asks a Seller to pay all or any portion of his closing costs, this is a NEGOTIABLE ITEM and should be negotiated at the time an offer to purchase is presented to you.  There is NO absolute obligation for you to pay a purchaser’s closing costs.

If you have additional questions after reading my answer, please feel free to write again with questions or a request for clarification.

Good luck to you.

Regards,
Elizabeth