WHAT ARE THE COSTS ASSOCIATED WITH SELLING A HOME IN FLORIDA?
If you are ready to put your home on the market, there are a lot of things to consider. What is the value of your home? How quickly do you think you will be able to sell? What is the status of the real estate market in Florida right now? While lots of constantly-changing factors will influence your home sale, there is one thing that is certain: selling your home will cost you money.
The costs associated with selling real estate in Florida are relatively fixed, so you can plan ahead by calculating your costs and including them in negotiations with agents and with potential buyers. In general, the fees, taxes, and closing costs that come with selling a home are linked to the purchase price for your property. A good estimate on your home’s sale price can go a long way in helping you plan.
Real Estate Commission
The commission you pay a real estate agent or brokerage firm will be one of the biggest costs associated with selling your house. Different firms charge different commissions: either a flat fee or a percentage of the purchase price. For most brokerage firms, 5-6% of the sale price is a common commission. However, these costs are negotiable.
Just because commissions are negotiable, however, does not mean that you should go with the firm that offers the lowest commission fee. Commission fees cover different services based on the brokerage firm you choose, so it is wise to shop around. Commission fees may include services such as professional photography, listing postcards, social media marketing, a dedicated website for your home, open houses, and even staging costs. Compare marketing plans, experience, and past performance when selecting an agent and/or brokerage firm. Remember that any commission you pay will go to the brokerage firm you, as the seller, hired and be split with the buyer’s brokerage firm if the buyer is represented in the transaction.
If you have any outstanding balance on your mortgage, this will also constitute a large portion of your costs. Call your lender in advance and get the actual payoff for your mortgage. The actual payoff is likely higher than the remaining balance listed on your monthly mortgage statement once you take into account any interest prorated through the closing date, pre-payment penalties, if applicable, and other fees.
If you have a line of credit outstanding, this will also need to be paid off. All liens must be satisfied at the time of closing, so it is important to include those costs in your calculation prior to selling your home.
Documentary Stamp Tax (Doc Stamp Tax/Excise Tax)
In the State of Florida, sellers are required to pay a documentary stamp tax whenever real estate is conveyed and ownership is transferred, unless the sales contract provides otherwise. The tax is based on the county where the home is located and the sale price. If your home is in Miami-Dade County, then the tax is calculated at $.60 per $100 of sale price. If your home is in any county other than Miami-Dade, then the tax will be calculated at $.70 per $100 of sale price. For example, if you sell your home in Pinellas County for $300,000, you (the seller) will have to pay a doc stamp tax of $2,100.
Before real estate can be transferred, a title agent will generally have a third party title search conducted to confirm that there are no outstanding liens or encumbrances on the proeprty. These “clouds” to clear title include mortgages, mechanics liens, outstanding judgments, code violations, and utility liens. Any such encumbrances will need to be resolved before the property can be sold. A title examination usually costs between $200 – $400.
During the title examination, a third party will also confirm the chain of title. Chain of title looks back at the history of the property from the original owner to the current owner. This research verifies that, at each time that the property was transferred, the sale was done correctly and there are no “clouds” on the title.
After the examination is performed, the title company can issue title insurance. This protects the new owners of the home from any claims or defects in title that the examination may have missed. The cost of title insurance depends on the price of the home, and who pays for the title insurance will be negotiated between the buyer and the seller. In most Florida counties, it is customary for the seller to pay for title insurance. However, in other counties, the buyer generally pays. Make sure that this is discussed and settled during negotiations.
In Florida, property taxes are paid in arrears. This means that bills are sent out in November, and the tax bill is assessed for the year just completed. For this reason, home sales will generally include a prorated property tax credited to the buyer. At the end of the year, the buyer will properly pay the full year’s property taxes. For example, if the yearly taxes on your home are $4,000, and closing on your sale occurs in the beginning of April, then you will credit the buyer the taxes for the three months of the year before they purchased the home ($1,000). At the end of the year, the buyers will pay the full $4,000 property taxes owed.
Up until this point, the costs have been pretty predictable. In general, these are the baseline costs you can expect when selling your home. However, the rest of the costs discussed in this article may be the buyer or seller’s responsibility. These will be points of negotiation as you settle on a final sale price. Make sure that all costs are discussed, negotiated, and formalized in the sales contract.
Buyer’s Closing Costs
If the buyer is going to be getting a mortgage, he or she may try to get you to help with closing costs. Most mortgage lenders will allow the seller to pay a percentage of the buyer’s closing costs. When discussing these additional costs, make sure you are aware of your current costs up to date so that you know how much room you have to negotiate.
Home Warranty Fees
Some sellers may choose to offer a home warranty if there are some components of the home that are a little worn out (air conditioning, water heater, etc.) Including a home warranty policy is completely optional, but it might make your home more competitive in the market. A one year home warranty policy typically costs between $375 – $600.
Some mortgage lenders will require the buyer to obtain a pest inspection prior to purchasing. Specific loans (including VA loans) will actually require that the seller pay for the pest inspection. These kinds of inspections usually cost between $100 – $150.
Title & Escrow Charges
Once you near closing, there will be fees associated with drawing up the closing documents and representing you in the closing process. These fees may be owed to a title agency or an attorney. The average cost of closing is between$500 – $800 and is usually paid by the buyer or split between the buyer and seller. However, as with other fees, this can be negotiated. Make sure that this is clarified in the sales contract.
Throughout this process, there are likely to be other small, miscellaneous charges that arise. We advise that you plan to spend at least a few hundred dollars on unexpected costs. These may include wire transfer, estoppel, and courier fees.
Hiring An Experienced Attorney
The State of Florida does not require a seller to involve an attorney in a real estate sales transaction. However, you may decide that it is in your best interest to do so. A skilled attorney, like the ones at Kira Doyle Law, can review the final sales contract and assist you with the closing details. If you are going to be renting the home back for a period of time, our attorneys can also help you with the preparation of a lease agreement. It is also useful to have an attorney if there are any encumbrances that show up as a result of the title search.
If you are thinking about selling your home in Florida, call our office in St. Petersburg, Florida, at 727-537-6818 to schedule an appointment with one of our experienced real estate attorneys today!