Over the past year, housing in Utah has seen one of the strongest seller’s markets this state has ever experienced. Historically, markets cycle from buyer to seller markets every 7-10 years. I have a theory that with the speed of technology that the time between cycles will become much shorter – perhaps even as short as 5 years. With this in mind, chances are that you will be selling your home within the next 10 years, thus you need to be knowledgeable on what your costs will be so you can accurately calculate the bottom line and not be surprised as you prepare to close on your home.
Closing and Settlement
In Utah, you will hear the term, “Closing,” which refers to when your home is sold, but this is really a misnomer because there are two key components of transferring the ownership of the home from Seller to Buyer. The first component is settlement which is when the seller and buyer meet with an Escrow Officer to sign the deed and the buyer brings in any additional funds over the amount of their approved mortgage. Additionally, during settlement, a document called the Settlement Statement, which accounts for the distribution of all monies during the transaction is reviewed and signed by both parties. At this point, the title company will send all signed documents and an accounting of all funds to the buyer’s lender wherein they will receive instructions and authorization to finalize the transaction and move onto the final component – Closing.
Closing is the action of recording the deed with the municipality and distributing the buyer’s funds to the seller and to clear any liens or encumbrances on the seller’s property. After this is completed, the title company will contact the agents of the buyer and seller and let them know that the transaction has funded and is closed. Depending on how the conditions of the purchase contract are written, the buyer can now receive keys to their new home and take possession.
Settlement Statement and the Actual Costs to Sell Your Home
Now that you understand the final steps of selling your home, it is imperative to see how the Settlement Statement I previously mentioned will break down the different possible costs that you could have when you sell your home.
Below you will see a list of the most common closing costs you will encounter:
1. Real Estate Commissions
There is not a standard cost that real estate brokers charge for selling a property – the range can be from 1% to 7% of the total sales price of your property.
2. Outstanding Mortgage Loan
Once you have selected a title company, the Escrow Officer should ask you to assist them in petitioning a payoff from the lienholders on the title of the home.They may ask you to sign a release of authorization so they can speak to your lenders and to receive a written payoff good through at least the day of closing.Often, this amount will be calculated for a few days past the closing to account for weekends or any other obstacle that would impede funds being wired to your mortgage companies.If this occurs, you will typically receive a refund of overpayment from your mortgage company within 30 days.Make sure you have updated your new address with them and forwarded your address with the post office.
3. Title Fees
Title companies charge a fee for their services and to insure that the settlement and closing go smoothly. The breakdown on the settlement statement will include charges such as:
Document Preparation & Compliance - $50 - $250
Owner’s Title Policy - this cost will depend on the final sales price of the transaction. For example, on a $350,000 home, the owner’s policy will be approximately $1,850. An $800,000 home will cost the seller approximately $3,100. The owner’s policy is negotiated in the Utah Real Estate Purchase Contract and requires the seller to pay for the buyer’s peace of mind that if any claims against the home arise from prior to their purchase, they will not be liable to pay for those claims.
Settlement Fee - $200 - $300
Re-conveyance Fee - $75
4. Prorated Property Taxes
Property taxes in Utah are due on November 30th of each year. As a seller, you are responsible to pay the prorated amount of taxes for the days you lived in the home up to the date of the closing. For example, if your annual property taxes are $3,500 per year and the sale of your home is transacted on August 8th, the title company would pro-rate your tax liability as follows:
$3,500 / 365 days = $9.59 per day
$9.59 x 219 (August 8th is the 217th day of a non-leap year) = $2100
This amount would be a debit for the seller and a credit to the buyer on the Settlement Statement.
5. Potential Attorney Fees
If you choose to use an attorney to review documents or to participate in any part of the sales process, you should plan to pay anywhere between $500 and $2,000.
6. Homeowner’s Association Fees
The Utah Real Estate Purchase Contract allows for negotiation as to whether the buyer or seller will pay any HOA transfer fees or special improvements that could be due. As such, this price is variable, but should be planned for.
7. Credit Towards Buyer’s Closing Costs
Some offers may request that the seller pay or contribute to the cost of the buyer’s closing costs. The exact amount will be included in the offer, so this should not be a surprise when you get to closing, but you do need to realize that this will come directly out of the money you would be receiving for selling your home.
8. Other Costs
The following costs will not be included in your settlement statement; however, you should be aware that other costs you may have could come as you prepare to sell your home and once you move out. A few are listed below:
Inspections
Staging
Home Improvements to prepare the property to sell
Storage Fees
Moving Companies
Closing Thoughts
Obviously, the process of selling your home is an event you may only go through 4 or 5 times in your lifetime. Your home is likely your most valuable asset. Be prepared. Hire a professional Realtor to guide you through this process and to deliver you the best experience possible.
If you are looking to buy or sell your home in Utah County, Salt Lake County, Heber City or Midway, please reach out to me with any questions at (801) 885-2558 or by email at brandonrwood19@gmail.com.