When closing the deal on selling your house with a mortgage, it’s important to know that if you sell your house for more than you owe on the loan, you will more than likely make a profit and walk away with a decent percentage. However, there have been cases where the property owner sells the house for more than what is owed but the seller doesn’t see a dime from it or even owes money. To help determine if you’ll make or lose money when selling your house, the company Local Records Office created a list.
Where Do You Get Hit the Hardest When You Close Deal?
Let’s get this out of the way; you will get hit hard when you close the deal, that’s just how it goes. Traditionally there will be a middleman that will take the buyer’s money, usually a title company, attorney, or an escrow company, depending on where the property is located. This money will be used to pay off the seller’s mortgage.
“Many people don’t realize that a middle person or company will take a big chunk of the asking price.” says, Ben Clark, a senior broker of Water Pines Real Estate Brokers in SoCal. Other people will be paid first before seeing if you’ll make a profit first.
What Are the Most Common Commission Fees?
People need to be paid commissions before the seller sees a profit. The real estate agent and the buyer’s agent both take a chunk. 5% is the typical commission that real estate agents will take when a deal is closed. Typically the percentage will be outlined in the agreement that you signed when the seller was hired to get the job done. If all the people or companies involved don’t get paid with the extra money you will have to pay them out of pocket. No one wants to pay out of pocket when it comes to these things but it has to be done.
Commonly the escrow company, title company, or lawyer who is taking care of the closing will also take their percentage.
“It’s not as easy as buying something and closing the deal at a store where you have a buyer, supplier, and seller. A lot more goes on behind the scenes.” says, Clark.
What Are the Closing Costs?
In most cases, the buyer pays the majority of the closing costs while the seller is left with smaller fees. The most common percentage is 1% of the closing price of the property but can go up as high as 3%. Other fees like insurance premiums and recording fees can also add up.
“Fees can up very quickly when you close a deal, and leave your wallet empty. The more the property is worth the higher the fees the buyer and seller will pay” says, Clark.
Still Owing Taxes on the Property You Are About to Close the Deal On?
Once the closing deal is done and all the agents involved are paid, the next step is to pay property taxes on the house. In most states, property taxes are paid in advance, usually for a year or two, and paid in arrears, meaning that the taxes paid in 2019 are actually for the prior year.
In most states, the buyer isn’t responsible to pay the arrears so that means the seller will have to pay a year or two of property taxes. Property taxes vary on the location but they usually start at $50. The low fee of $50 will be for a property located in the middle of nowhere. In areas like downtown Chicago or downtown Los Angeles, a $300 monthly property tax fee is common. $300 might not seem like a lot at first but it will add up quickly. When 2 years of $300 a month need to be paid all at once, that’s a whopping $7,200. If you see any money after all of the fees are paid, congratulations.
Can a House Be Sold If a Mortgage is Still Owed?
Yes, a house can be sold even with a mortgage still owed on it. The sale proceeds from a mortgaged home are used to clear the debt as well as any other liens or debts attached to the property. You will receive the difference as profit if the sale price of the home is higher than the total of your debts, including your mortgage. You will still be liable for paying off the remaining balance of the mortgage if the sale price is less than what you owe.