An in-depth look at closing costs borne by sellers in Florida including some overlooked expenses like title insurance. —-
In a recent study, Florida was found to have more homes for sale than any other state in the nation. Many Florida home sellers have been caught off guard by the litany of costs they are responsible for at closing. However, real estate experts say the bulk of these expenses are par for the course, so it’s best to be financially prepared and informed at the start of the process.
Seasoned Florida Realtor® Zac Coletti said he has encountered many sellers who are blindsided when they find out what they have to pay at closing and often finds himself taking on the role of educator. For example, he says that although it’s customary for sellers to pay for title insurance in Florida, most sellers don’t realize it and become alarmed.
“It really depends on how the information is presented to the seller,” Coletti says. “If it’s brought up as a red flag, then it’s going to be a red flag in the seller’s eyes. If it’s presented to them as a standard, typical cost that’s nothing to be alarmed by, there are never any issues.”
What are closing costs?
Closing costs are a set of fees paid by the seller and buyer when a home or other real estate is sold. These charges, also referred to as settlement fees, are due at the end of the transaction when the title of the property is transferred to the buyer.
According to Coletti, Florida home sellers typically pay about 2% of the total home sale price in closing costs (excluding agent fees), though it can range from 1.5% to 3%. To help illuminate the often murky home selling process, we spoke with Coletti to find out the itemized list of closing costs sellers should expect.
Varies by loan amount
Only if applicable
Loan Reconveyance Fee
$75 to $125
Reconveyance Recording Fee
$10 per page
$2,485 for median home price of $355K
$21,300 for median home price of $355K
$1,775 for median home price of $355K
Varies by transaction
Settlement Fee or Escrow Fee
$500 to $800
HOA Transfer Fee
Only if applicable
Only if applicable
Florida sellers cover these closing costs
Although there’s room for negotiations between buyers and seller for some closing costs, sellers can’t avoid responsibility for the following:
1. Mortgage payoff
The duration of homeownership in the U.S. has fluctuated over the years, but as of 2019, the median amount of time Americans owned a particular home was only about 13.3 years, which is not even the halfway mark of a 30-year mortgage. For Florida cities like Cape Coral and Lehigh Acres, homeowners only stayed put for 9.3 and 7.8 years, respectively.
With so many people wanting to fly the coup before the mortgage is paid off, it’s fairly standard that home sellers have to settle up their mortgage balance at closing time. Depending on how many years of mortgage payments remain, this could amount to a hefty sum. Ideally, your home’s selling price will exceed your mortgage balance allowing you to walk away from the transaction with a net gain.
2. Property taxes
Another major financial responsibility sellers can bank on at closing is property taxes. Fortunately for Floridians, the state’s average real property tax rate is 0.985%, which is lower than the national average of 1.08%. Although there’s a little variation depending on what county your home is in, Florida homeowners pay an average of $1,752 annually.
Because Florida property taxes are paid in arrears, Coletti tells clients to be prepared to make a tax payment, prorated by the day, at closing. The actual due date of the taxes varies by county, and depending on when you sell the home, will impact the number of days to be prorated.
Although there are several types of closing costs that are up for negotiation between sellers and buyers, property taxes aren’t one of them, so sellers should be ready to pay their share.
3. Loan reconveyance fee
Your mortgage payoff isn’t really complete until you secure a reconveyance deed, which is proof that the loan was paid and your lender no longer has a stake in the property. Your mortgage lender will typically charge a reconveyance fee of between $75 to $125 to furnish the documentation.
4. Reconveyance recording fee
While this may be the most minimal of all the closing costs, it’s a necessary step as the county recorder must file the reconveyance in the county records. The fee varies by county but in Orange County, Florida, for example, expect to pay $10 per page and $8.50 for additional pages.
5. Transfer tax
In Florida, transfer taxes, often referred to as doc stamps, come into play for the vast majority of real estate transactions and are usually borne by the seller. Coletti explains that in most of the state the tax is calculated at .007 multiplied by the purchase price, or $0.70 per $100. However, in Miami-Dade County the rate is slightly lower at .006 times the purchase price, or $0.60 per $100.
With the median home price in Florida at about $355,000, sellers in the state can expect to pay about $2,485 in transfer taxes for a similarly priced home. In Miami-Dade the tax payment on a median priced home would be $2,130.
6. Real estate agent commission
Last year, around 89% of U.S. home sellers worked with a real estate agent. With the average agent commission in Florida totaling about 6% of the purchase price, according to Coletti, the payout can be a considerable sum that the seller is usually responsible for. For a home sale price of $355,000, expect to pay about $21,300, however the exact rate can vary. For a closer approximation of what you’ll pay based on your city use our handy commission calculator.
While the agent commission is far from a negligible fee, don’t be tempted to shop around for a bottom-of-the-barrel agent with the lowest rate. Remember that selling your home is likely the most significant thing you’ll ever sell in your life, and the agent you hire to help you is a professional who can help maximize your return. Also consider that the top 5% of real estate agents sell homes for as much as 10% more than the average agent.
7. Title guarantee
One area of great surprise to sellers is that they’re typically responsible for guaranteeing the title in Florida, Coletti says. This involves paying both the title search fee as well as title insurance. The title search involves in-depth research regarding the property’s history, such as whether any third parties could possibly have a legal stake in the home or any liens. Conducting a thorough title search helps ensure the new owner’s full rights to the property. In Florida, a title search costs at least $150 but can be more for more complex situations.
Once a title search is conducted, sellers will also often pay for the buyer’s title insurance to help protect against any claims against the buyer’s ownership rights that could arise. Title insurance premiums are one-time payments paid during the settlement period and cost $5.75 per $1,000 for purchase prices up to $100,000. For purchase prices above $100,000, the cost is $5.00 per $1,000. So for a home priced at $355,000 the insurance payment would be $1,775.
Since the state mandates title insurance, sellers can’t completely avoid the expense. However, Coletti says that the item can often be negotiated so that the buyer is the one who pays the title insurance fee.
Sellers may also cover these closing costs
Now that we’ve gone through the closing costs sellers should definitely be prepared to pay, the following items are additional costs that are usually up for negotiation between buyers and sellers.
“It’s important for sellers to understand that setting a price on your house doesn’t mean that that’s what the house is going to sell for,” says Coletti. “Negotiations start once the house goes under contract, so when you’re picking an agent and deciding what you want to sell your home for, you have to realize that there’s probably going to be some negotiations, most likely during the inspection period.”
Regarding concessions, Coletti says that in Florida an as-is contract is often used that allows the buyer to inspect a property for a certain number of set days. During that inspection period, the buyer can opt to cancel their contract and get their escrow money refunded. However, often what happens is that the inspection will reveal issues with the house, such as repairs that need to be made, and the buyer will either request that the seller make the repairs or will request a monetary concession in the form of a credit a seller offers in lieu of repairs. For example, if the inspection reveals that the home’s furnace requires repairs or replacement, the seller may add a $5,000 concession payment to the buyer instead of replacing the furnace themselves.
Coletti says it’s important sellers understand that if the house is under contract for a sale price of $300,000 but there ends up being $20,000 worth of concessions to be paid to the buyer, the seller still pays a commission based on $300,000.
The settlement fee, also known as the escrow fee or closing fee, is paid at the end of the escrow period, which is when the transaction is finalized. This is the time when all the final documents are signed and the transfer of the property between the seller and buyer takes place.
The settlement fee is usually paid by the buyer in Florida, however there are some instances where it’s negotiated so that the seller pays the expenses, which generally costs between $500 and $800.
HOA and condo dues
Given that there are about 48,500 HOAs in Florida and roughly 9.57 million people living in communities governed by HOAs, the chances are strong that you’re selling a home with an HOA. If that’s the case, make sure to factor in additional related expenses into your closing costs tally.
In addition to paying the association any remaining dues you owe, you’ll also have to pay an HOA transfer fee. The good news is that the fee is lower in Florida than in other states because of a law that caps it at $100. It’s customary for sellers to pay the HOA transfer fee in Florida.
Although the state had previously been one of 19 states and the District of Columbia that had required an attorney at closing, Florida has since dropped the requirement. As such, paying attorney fees are not mandatory and it’s the title company that handles the legalities of the closing process. However, there are some complicated transactions where an attorney could help secure the process. Instances such as when there’s a divorce between the sellers or a complex title issue may warrant the expertise of an attorney to add strength to the finalized terms of the sale.
Estimate your net proceeds after closing
No matter where you live in Florida, use HomeLight’s Net Proceeds Calculator to estimate your closing costs and, hopefully, your net profit. Even if you have a rough estimate of your costs, the calculator can help you get a better estimate of your net proceeds so you can prepare in advance for discretionary spending or home improvement and staging.
Additionally, Coletti says an agent may provide one or more net sheets during the initial listing appointment that outlines various scenarios for how much the house could sell for, the expenses you’ll incur and what you’ll have in your pocket after the sale.
The final word given on all your closing costs is provided in the settlement statement you’ll receive at the end of the process. The itemized list will show all the fees you’ve paid, credits and your net profit. This is your last opportunity to review all the finer details to make sure everything is accurate, so don’t skip this step. If something doesn’t look right, ask your agent or title company for an explanation before proceeding with the sale.
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