Baltimore home buyers and sellers have many costs to balance. While buying a home may seem straightforward, selling your home often involves closing costs you may not be aware of.
It’s important to stay current on the closing costs associated with selling your home in Maryland. Understanding these costs can help with your offer negotiations and prevent unexpected fees.
Here is a guide to help you understand the most common closing costs home sellers must pay, who they are paid to, and how much they could cost.
What are Closing Costs?
Closing costs are the taxes, fees, and other expenses that every seller must pay at the end of a home sale. The nationwide average for closing costs is between 6% to 10% of the overall sale price. These costs can vary with each home sale, but you can typically expect to pay in the tens of thousands of dollars.
Closing costs include:
- Title, Recording, and Attorney Fees
- Title Insurance
- Transfer and Property Taxes
These closing costs are essential; most go to the state, so you don’t want to forget about them. If you sell your home with a realtor or estate agent, they will likely also charge closing fees. We’ll go into more detail on these costs below.
Don’t Forget Your Mortgage Payoff
When you sell your home, any remaining mortgage payments must be made before the sale can close. Often, sellers will use the money made in the home sale to pay off the remaining value on their mortgage. This must be done before the title can be transferred to your buyer.
Title, Recording, and Attorney Fees
The title to a home indicates who legally owns a home. When a property is sold, the legal process of changing that title begins, and quite a few fees are associated with that change.
First, there is a charge for searching for and updating property records. A local government authority will ensure that there are no current legal issues with the home’s ownership and title. Once ownership is verified, the title can be transferred to the new owner.
Next, there is the matter of your current mortgage. Many mortgage lenders will charge a fee to the sellers of a home when they close out their mortgage. While the fee typically isn’t a substantial amount of money, you should be aware that it may happen.
Lastly, there are attorney fees. Maryland legally requires that all mortgages and deeds be prepared by a licensed attorney or by one of the parties listed in the actual paperwork. Sellers often choose to work with an attorney to ensure that their paperwork is filled out correctly by someone with expertise in the matter. If you decide to work with an attorney, keep in mind that they will charge a fee that is a part of your closing costs.
A Benefit to Selling My House in Baltimore
Maryland is a title company state. This means that one organization typically wraps all the fees associated with a title change into one fee. They can provide an attorney to manage the title and deed, handle your mortgage closing fee, and deal with titling and recording.
This makes payment far easier and prevents you from having to keep track of large amounts of smaller fees in favor of one larger one.
Title Insurance
Title insurance protects the buyer and their lender from any potential legal issues related to your property’s title. In most cases, you’re responsible for covering the policy for the buyer.
In Maryland, title insurance fees can vary from 0.5% to 1% of the home’s sale price. While not legally required in Maryland, most buyers still insist on it for protection. It protects against liens, disputed ownership claims, or other hidden defects that could affect the buyer’s ability to take full legal ownership of the property.
Covering this cost provides peace of mind and helps streamline the closing process. Title companies bundle this insurance with their other closing services, so check whether this fee is included in your overall closing cost estimate.
Transfer and Property Taxes
To sell your home, you will need to be up-to-date on any property tax payments you owe your municipality and the state. Property taxes are usually issued by county governments in July or August each year. Maryland taxes $0.106 for every $100 your home is worth.
Local governments will also take a bit more money, so the amount you pay in property tax will vary depending on where you live. When you sell your home, you must settle any property tax payments on the day you close. If you already paid your property taxes, you can be refunded for the days you were not on the property when you file your state tax return.
In addition to those taxes, you will have to make a one-time payment to both the state and your local government to finalize your home’s sale. Often during home negotiations, buyers and sellers agree to split these costs in a fair manner.
The state of Maryland taxes 0.5% of the home’s sale price for their transfer tax, but for first-time home buyers, that fee is lowered to 0.25%. The percentage of the sale that localities charge differs by area, but in the city of Baltimore, it is 1.5% of the home’s sale price.
Real Estate Agent Fees
Real estate agent commission fees are often the most expensive aspect of your closing costs. Sellers are expected to pay for the agents’ fees and the costs of listing the home. In Maryland, real estate agents typically charge around 5% of the house’s sale price.
In Maryland, you do not have to use a realtor when you sell your home. If you want to avoid the hefty fees associated with real estate agents, you can list your house for sale by owner (FSBO). While you, as the seller, will have to complete the work of an agent, including listing and advertising your home, you won’t have to pay the markup commission on your closing costs.
The easiest way to avoid real estate agent fees and the work associated with listing your home FSBO is to sell to a company that buys houses in Baltimore. These buyers have the experience to walk you through the home-selling process without the additional fees.