Selling your home can be more expensive than you think. At closing, sellers in Kentucky typically have to pay 5%-6% in realtor commissions plus 1%-3% in other closing costs.
Since most closing costs cover the processes of legally transferring money and property between two parties, there's little wiggle room in the total amount. Knowing what you're expected to pay helps you prepare and identify any possible way to save at closing.
One option is working with a low-commission real estate agent. Clever partners with top, local agents who offer the exact same full-service experience at a deep discount. Save as much as 50% on agent commissions without sacrificing the level of support you receive.
> Reach out to learn more about ways to save and get connected with top agents in your area.
In the meantime, are you still curious about closing costs and how much you should expect to pay? Let's delve into the various costs Kentucky sellers pay.
What are closing costs?
A lot of work goes into selling a property. All that work finally comes down to one day: closing. This is when documents are signed, money changes hands, and ownership of the property is legally transferred to the buyer.
Closing a real estate transaction requires a team of professionals and they would all appreciate being paid for their work. Additionally, small transactions like transferring money and recording the transfer of ownership with the local assessor's office come with fees.
All these costs, small and large, add up as closing costs. The burden is typically shared between the buyer and the seller. Let's find out how much of the cost you should expect to bear.
How much are closing costs in Kentucky?
On average, sellers will have to pay about 1%-3% of their home's sale price in closing costs. This is on top of the typical 6% real estate commission. All this money due at closing can add up quickly, so if you have a low amount of equity in your home be sure to prepare yourself.
Buyers, on the other hand, tend to pay between 2% and 5% of the sale price in closing costs. However, as with most things in real estate, who pays which cost is negotiable.
How to Calculate Your Closing Costs in Kentucky
How much can you expect to pay when selling a home in Kentucky? According August 2019 data from Zillow, the median home value in Kentucky is $146,000. On a home that sells for this price, 1%-3% of the sale price equals $1,460 to $4,380.
What's included in Kentucky closing costs?
Let's break down the closing costs to learn where all that money goes. This list includes all typical closing costs. While buyers and sellers each pay for specific expenses, who pays what is negotiable so it's important to be familiar with all costs in case the buyer's offer asks you to cover any buyer's closing costs.
Credit Report: $20-$50
The lender will pull a credit report to determine the creditworthiness of the buyer.
Home Appraisal: $450-$650
To protect their assets, lenders require an independent appraisal to determine the home's value. If the appraisal comes in too low for their standards, they may deny the loan request.
Home Inspection: $300–$500
Though not required, buyers will usually hire a home inspector. This gives them peace of mind that there aren't a million hidden problems with the house. Or at least not any big ones, like foundation issues.
Loan Fees: 0.5%-1.5% of the sale price
There are various fees associated with taking out a loan. These can include an origination fee, application fee, and any prepaid interest or discount points the buyer chooses to pay upfront.
Mortgage Payoff/Prepayment Penalty: Varies
If you have an outstanding balance on your mortgage, this will need to be paid off when you sell. Most mortgages become due immediately upon transferring ownership of the property. With the asset securing the loan no longer in your possession, the lender has nothing to seize if you default on the loan.
Outstanding Running Costs: Varies
All running costs like utility bills, HOA fees, property taxes, and homeowner's insurance have to be paid. These costs are prorated to the day of closing.
Recording Fee: Varies
Counties charge a fee to record the property transfer and possibly the mortgage. In Jefferson County, the fee is $17 for the first three pages and $2 for every page after that.
Real Estate Attorney: $150 to $500 for attorney fee
Some states require an attorney to oversee the closing process. Kentucky is one of them so you'll have to hire a closing attorney and pay their fee.
The mortgage company will require a property survey to ensure that the property lines are recorded correctly. The last thing they want is for the property to end up in a dispute over who actually owns it.
Title Insurance: About $1000
Both parties are usually required to take out their own title insurance policy. This protects them in the event that problems with the title come up after the sale.
Title Search: $300-$600
A title search is necessary to ensure that you legally own the property and there are no outstanding judgments or claims against the home.
Transfer Taxes: Varies
Transfer taxes are a local tax and thus can vary widely by location, even within the same state. Transfer taxes in Kentucky include a general $0.50 for every $500 of the property's value. Local municipal taxes may also apply.
Other Home Selling Costs in Kentucky
Remember that closing costs aren't the only costs associated with selling your Kentucky home. The property may need repairs or improvements to ready it for the market.
The market is pretty hot in Kentucky right now, meaning these services aren't always as necessary because there are plenty of people looking to buy. However, ask your real estate professional what they would recommend in the current market in your area. The investment is still likely to pay off.
You also have to consider the real estate agent's commission. This is paid at closing and in general, runs about 5%-6% of the sales price.
> Use this calculator to find out more about the average commission in Kentucky.
Learn more: The Average Cost of Selling a Home in Kentucky
Who pays closing costs in Kentucky?
While the buyer and the seller each have their own typical lists of closing costs, there is always room for negotiation. Let's look at who usually pays what in Kentucky.
Typical Seller Closing Costs
The costs the seller is usually responsible for include:
- The mortgage payoff and any prepayment penalties
- Outstanding running costs
- Title insurance for the buyer
- Seller's attorney fees
- Transfer taxes
- Recording fees
Typical Buyer Closing Costs
Buyers typically handle the following:
- Credit report
- Loan fees
- Title search
- Title insurance for the lender
- Home inspection fee
- Home appraisal fee
- Survey fee
- Buyer's attorney fees
Should you pay the buyer's closing costs?
In some cases, the buyer may request that the seller pay a portion of their closing costs. But what is the advantage for you? Should you agree to their request?
It depends. Buyers who are short on cash may offer a higher sale price and ask for the seller to pay a portion of their closing costs. In effect, these seller credits roll the costs into the buyer's loan.
For example, they may offer $13,000 extra while asking for $10,000 in closing costs. You would benefit from the extra $3,000.
Another time it could benefit you is when the market is slow. By offering to pay a portion of their closing costs you can incentivize buyers.
Also consider popular FHA loans (or any low down payment type loan) are in your area. You might price out all buyers who don't have enough cash for closing costs, which could potentially reduce your buyer pool by quite a bit. Covering some buyer's closing costs means more people can come to the table with offers.
Key Takeaways for Kentucky Home Sellers
Closing costs are an unpleasant part of the home-selling process. It's disheartening to see how much of your profits are spent before you ever receive the money. It's even worse if you don't have enough equity in the home to cover them.
For specific advice on ways to save at closing, speak with a local real estate agent to learn about your options. Clever partners with top agents in your area who can provide all their services and knowledge for less. They work for a flat fee of $3,000 or 1% on homes over $350,000.