Selling a home is complicated and there is a lot of paperwork involved, which also means it's expensive. Sellers often end up paying between 1% and 3% of the sale price in closing costs. That's on top of a typical 6% agent commission.
Before you put your home on the market, you need to have an idea of what to expect to pay in closing costs — and how to maximize your profit. One of the best ways to save money is by lowering one of the biggest costs: agent commission.
You could save up to 50% in real estate commissions, which translates to thousands of dollars, by working with a full-service, discount agent.
If you want to understand more about what to expect with closing costs for sellers in Colorado, keep reading to learn all about it.
What are closing costs?
Closing day is the big day you've been waiting for during the home selling process. Money moves, documents are signed, and ownership of the property is transferred to the buyer. You'll receive the funds from the buyer and their lender and you'll pay off any remaining loan balance you hold.
Closing costs are the fees associated with all the services and individuals involved in a real estate sale. Common closing costs include things like title search fees, lender's fees, attorney fees, and much more.
How much are closing costs in Colorado?
Closing costs vary by location. Because of things like local transfer taxes, they can even vary significantly within the same state. Let's look at some averages for Colorado to get an idea of what to expect.
Buyers tend to be responsible for a larger number of the closing costs, adding up to about 2%-5% of the home's price. However, the seller typically pays agent commissions, which is often 5%-6%.
On top of that, they typically pay between 1%-3% of the purchase price in other closing costs. If you're not prepared for this, you can feel a little blindsided by the amount.
How to Calculate Your Closing Costs in Colorado
To get a rough estimate of your closing costs, simply multiply your home's value by 1%-3%. According to Zillow, the median home value in Colorado is $378,300. At that price, the seller's closing costs may range from $3,783 to $11,349.
What's included in Colorado closing costs?
Let's take a look at some typical closing costs to get an idea of what you're paying for. While buyers and sellers are responsible for different expenses, who pays which closing costs isn't set in stone. A buyer may submit an offer that asks you to cover some of their fees so it's essential for you to be familiar with all closing costs, not just the seller's.
Title Search: $300-$600
A title search shows that you are the legal owner of the property. It also checks for any outstanding judgments or claims against the property that could prevent you from selling.
Title Insurance: About $1000
Both the buyer and the seller are typically required to purchase their own title insurance policy. This insurance protects the buyer and their lender in case of any title issues arise after the sale.
Home Inspection: $300–$500
While usually not required, most buyers will request a home inspection. This will turn up any problems with the home's structure or systems that would be unpleasant surprises later on.
Home Appraisal: $450-$650
Lenders typically require an independent appraisal. This is to ensure that the home is actually worth the proposed sale price. In case the buyer defaults on their loan, the lender wants to be sure they can sell the home for the amount of the loan.
Loan Payoff Costs: 0.5%-1.5% of the sale price
Fees involved with taking out a mortgage typically include an origination fee, application and assumption fees, and perhaps prepaid interest.
Mortgage Payoff/Prepayment Penalty: Varies
You'll have to repay any outstanding balance on your mortgage. Some lenders also charge a prepayment penalty when you pay off your loan early. Check your mortgage paperwork to find out if this penalty applies and how much it will be.
Transfer taxes: Varies
Local governments may impose a transfer tax every time a property changes hands. Colorado doesn't technically have a “transfer tax”. But they do have a 0.01% “documentary fee” which is the same thing in all but name. Buyers typically pay this tax, but sellers may agree to pay a portion during negotiations.
Settlement or Attorney Fee: $150 to $500 for attorney fee
Some states require a real estate attorney to oversee all real estate transactions. Colorado isn't one of them, however, you may choose to hire an attorney anyway. It doesn't hurt to have an extra set of expert eyes making sure that everything is handled correctly.
Survey Fee: $350-$500
Colorado requires that a property be surveyed when requesting a loan for it. This details the legal boundaries of the property.
Credit Report: $20-$50
Determines the credit-worthiness of the buyer so the lender can decide whether to approve their mortgage application.
Recording Fees: Varies
In Colorado, there is a recording fee for the transfer of $6 for the first page and $5 for each page after that. The Deed of Ownership is typically only one page, and loan documents vary from 4-20 pages depending upon complexity.
Outstanding Bills: Varies
Any outstanding running costs will have to be brought up to date. This can include utility bills, HOA fees, homeowner's insurance, and property taxes. All of these fees are prorated to the date of closing.
Other Home Selling Costs in Colorado
When selling a home in Colorado remember that closing costs aren't the only costs you need to consider. Your home may need repairs or improvements to prepare it for the market. To increase your chances of getting a higher price, you may want to invest in home staging services and professional photography.
While not technically a closing cost, the seller will typically pay real estate commission for both agents at closing, totally 5%-6%. If you have enough equity in the home, it will come out of the proceeds of the sale.
Commissions and closing costs can take quite a chunk out of your profits so you'll need to be prepared for them. If you don't have enough equity, you'll need to have cash on hand to cover any deficit.
Learn more: The Average Cost of Selling a Home in Colorado
Who pays closing costs in Colorado?
We've seen a list of common closing costs that may apply to your transaction. But who is typically responsible for paying which costs? Let's find out.
Typical Seller Closing Costs
The typical closing costs that sellers pay in Colorado are quite straightforward. They include:
- Mortgage payoff and prepayment penalty
- Title insurance
- Outstanding bills
- Seller's attorney fees
- Recording fees
Typical Buyer Closing Costs
The buyer has a lot more costs to handle, typically because of everything involved with taking out a loan. Typical costs include:
- Title search
- Credit report
- Loan fees
- Title insurance
- Home inspection fee
- Home appraisal fee
- Buyer's attorney fees
- Survey fee
Remember that none of this is set in stone. During negotiations, buyers and sellers can come to a different agreement about who pays what.
Should you pay the buyer's closing costs?
If a buyer wants you to pay some of their closing costs, should you? What benefit do you get? Sellers may agree to pay a buyer's closing costs for a few reasons.
In a sluggish market, the seller may have trouble finding a buyer, so they agree to pay a portion of the buyer's closing costs as an incentive.
They also may do it to help a buyer who doesn't have quite enough cash on hand for the transaction. Buyers typically agree to a higher asking price when asking the seller to handle some of the closing costs, essentially rolling the costs into their loan.
In some cases, the buyer will offer a bigger bump in sale price than the closing costs they're asking you to pay. For example, they may offer $15,000 extra and ask for $10,000 in closing costs. In that case, you get an extra $5,000 added to your profit.
Key Takeaways for Colorado Home Sellers
Sometimes the idea of closing costs can feel nebulous, causing uncertainty and stress. It's hard to say exactly how much your closing costs will be, but knowledge is power. Now that you've learned what's involved in closing costs and how much they typically are, we hope you feel less uncertain.
Since closing costs vary by location, reach out to a real estate agent, attorney, or tax advisor near you. They can help you get an idea of what to expect to pay in your neighborhood and in the current market.
Still feeling like the closing costs are piling up? Clever can help lower your costs by taking a big bite out of the agent commission you'll have to pay. Paying less commission means more of your profits go back into your pocket, where they belong.
Instead of paying 3% to list your home, Clever has partnered with top agents who will sell your home for $3,000 or 1% if your home sells for more than $350,000, saving you up to 50% on commissions.