The cost to sell a house in California is made up of several categories: real estate agent compensation, escrow and title fees, transfer taxes, disclosure reports, HOA fees, agreed repairs or credits, prorated property taxes and your mortgage payoff. The total depends on the sale price, the property and what you negotiate with the buyer.
What are the main costs of selling a house?
Most seller costs fall into a short list of categories. They are normally paid out of the sale proceeds at closing, so you see them as deductions on your settlement statement instead of writing separate checks.
- Agent compensation. What you pay your listing broker is set in your listing agreement.
- Escrow and title fees. Escrow handles the money and documents. Title insurance protects against problems with ownership records.
- Transfer taxes. The county charges a documentary transfer tax when a property changes hands, and some California cities add their own.
- Natural hazard disclosure report. A third-party report that shows whether the property is in certain mapped hazard zones.
- HOA document and transfer fees. Charged by the association or its management company when the home is in an HOA.
- Repairs or credits. Anything you agree to fix or credit to the buyer during the transaction.
- Prorated property taxes. Your share of taxes and assessments up to the day escrow closes.
- Mortgage payoff. The remaining loan balance, interest to the payoff date and any lender fees.
Is real estate agent commission set by law?
No. Agent compensation is not set by law and is fully negotiable between you and your broker. It is written into the listing agreement before the home goes on the market.
A buyer may also ask you, as part of an offer, to pay some or all of the compensation for the buyer’s agent. That is negotiable too, and you can weigh it along with the price and the other terms of the offer.
Who pays escrow fees, title fees and transfer taxes?
Who pays each fee is decided in the purchase contract, and local custom usually guides how the offer is written. In many Southern California sales the buyer and seller each pay their own escrow fee and the seller pays for the owner’s title insurance policy and the county transfer tax, but any of this can be negotiated.
The exact amounts depend on the sale price and the companies involved. Your escrow officer can give you the figures for your transaction, and your agent can point out which items are open to negotiation.
Will I have to pay for repairs or give the buyer credits?
Only if you agree to. After inspections, a buyer may ask for repairs, a price reduction or a credit toward closing costs. You can accept, decline or make a counter proposal.
Some costs depend on the property. Pest inspection and repair work, a home warranty for the buyer, and items required at sale such as smoke alarms, carbon monoxide detectors and water heater bracing may fall to the seller depending on the contract. Homes in communities with special assessments, which are common in parts of Temecula, Murrieta and Menifee, will also have those charges prorated at closing.
Do I pay taxes when I sell my house?
You may owe capital gains tax if you sell for more than your adjusted cost basis, but a home-sale exclusion may apply if the property was your primary residence and you meet the ownership and use requirements. Whether you qualify, and how much gain is taxable, depends on your own situation, so confirm it with a CPA before you list.
Escrow will also have you complete state and federal tax forms related to the sale. Ask your escrow officer and your CPA what applies to you.
How do I find out what I will net?
Ask for an estimated seller net sheet. It lists the expected sale price, subtracts each estimated cost and your loan payoff, and shows roughly what would be left. It is an estimate, and the final numbers come from escrow at closing.
If you would like an estimate for your home, you can contact Aimee and she will prepare one with you.
Frequently Asked Questions
Are closing costs paid out of pocket or from the sale proceeds?
Most seller closing costs are deducted from the sale proceeds at the close of escrow. Costs you take on before listing, such as repairs, cleaning or staging, are usually paid up front.
Do sellers pay the buyer’s closing costs?
Not automatically. A buyer can ask for a credit toward closing costs in the offer or after inspections, and the seller decides whether to agree. It is one of the terms to compare when reviewing offers.
What happens to my property tax impound account when I sell?
If your lender collects property taxes and insurance in an impound account, any balance left after the loan is paid off is normally refunded to you by the loan servicer after closing. It is handled separately from your sale proceeds, so ask your servicer about timing.
Can I sell if I owe more than the house is worth?
A sale has to pay off the loans secured by the property unless the lender agrees to accept less, which is called a short sale. If you think you may be in this position, talk with your lender, a real estate agent and an attorney or CPA before deciding.
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Aimee Ghafouri is a real estate agent based in Temecula who grew up in Murrieta and works with buyers, sellers and investors across the Temecula Valley and southwest Riverside County.
Aimee Ghafouri, 951 Properties, CAL DRE #02193341. This page is general information, not legal, tax or financial advice. Equal Housing Opportunity.
