Closing costs are often one of the biggest concerns for homeowners when they decide to sell. This guide takes a look at what closing costs sellers in Massachusetts might be responsible for when they list their home.
If you're listing your Massachusetts home for sale, you'll need to know how much you should budget for to cover your closing costs. Closing costs are the costs incurred by buyers and sellers during a real estate transaction and can vary significantly.
Sellers in Massachusetts can expect to pay from 2% to 4% of their home's total sales price in closing costs. This includes fees levied by the state, such as excise taxes, real estate lawyer's costs, and costs associated with the sale transaction. Be aware that real estate commission is typically an additional 6% of the sale price, and is not included in most breakdowns of closing costs.
While there are few ways to lower your closing costs, one of the best ways to keep more of your sales proceeds is to save on commissions. A discount real estate could save you thousands at closing without having to sacrifice service.
In the meantime, here’s what you need to know about typical closing costs from sellers in Massachusetts.
What are closing costs?
"Closing" is the final step of a real estate sales transaction; both parties have met all sales conditions, and it’s time to transfer legal ownership of the property to the buyer. Put simply, closing day is when all required legal documents are signed and money changes hands.
Massachusetts law states that a real estate attorney must preside over residential real estate closings, however, other real estate professionals also typically assist them during the process.
Closing costs account for all the expenses associated with a legitimate property transfer like taxes or inspection fees.
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How much are closing costs in Massachusetts?
Closing costs in Massachusetts typically run between 2% and 4% of the total sales price. In Massachusetts, as of September Zillow data, the median home value is $408,100 meaning $8,162 to $16,324 in seller closing costs.
The closing costs that buyers and sellers are responsible for vary. For example, the buyer’s closing costs are heavily influenced by their financing choice and include the lender's loan origination fee and the appraisal cost. In comparison, sellers tend to pay less in closing costs; however, on closing day real estate commissions can pile up on top of other selling costs.
How to Calculate Your Closing Costs in Massachusetts
To calculate sellers closing costs in Massachusetts, you first need to work out how much you will have to pay in-state transfer taxes. Real estate transfer tax is due from sellers when they sell their property and is the same rate for every Massachusetts county excluding Barnstable.
Sellers should budget for a transfer tax of $4.56 per $1000 of their sale price on the deed. For example, on the median Massachusetts home value of $408,100, the transfer tax amount would be $1,860.
Estimating the rest of your closing costs is more difficult. In general, the total will be 2-4% of the sales price. However, if you'd like a more specific range, you can request a quote from your real estate attorney.
It's also important to note that if you use a traditional real estate agent to facilitate your sale, there is also an additional 6% in commission due on closing day. On a home of median value, that would mean $24,486 would come out of the sale proceeds.
What's included in Massachusetts closing costs?
Closing costs in Massachusetts vary, and who pays what is often negotiable. As part of the sales agreement, buyers may ask for the seller to credit some closing costs. In this instance, it's useful to be aware of what the closing costs could be for both sides so you don’t agree to pay more than you expected.
Property Taxes: Varies
Property taxes in Massachusetts are set locally by the cities or towns, but rates generally fall between 1% and 2%. The state's average effective tax rate is 1.22%, which is higher than the national average of 1.08%.
Transfer Tax: $1860 on the median Massachusetts home value of $408,100
The real estate transfer tax in Massachusetts is calculated at $4.56 per $1000 increment of the deed.
Title Insurance: Varies
Title insurance in Massachusetts is calculated incrementally based on the sale price of your home, and can, therefore, vary significantly. The higher your property value, the higher the cost of title insurance.
Title Search: $300-$600
An examination of the property's title is required by most lenders and confirms who the legal owner is, as well as whether there are any encumbrances or outstanding liens that need to be settled.
Mortgage Payoff and Prepayment Penalty (if applicable): Variable
For most sellers, their outstanding loan balance is due at the time of closing. Some loan terms also include a prepayment penalty, which should be factored into closing costs if applicable.
If you aren't sure how much you owe on your loan, or whether it has a prepayment penalty clause, ask your lender.
Other Costs: Variable
If you have additional costs, such as HOA dues or utility bills, they should also be factored into your closing cost budget.
Other Home Selling Costs in Massachusetts
In some instances, sellers may benefit from offering buyers a home warranty. This is often a useful negotiation aid if your home is older, or if there is stiff competition between sellers in your area.
According to Bankrate, if you want to offer buyers a home warranty, you should expect to pay between $243 and $1,702; however, if your home is particularly large or has a lot of appliances, you might pay more.
Another type of cost sellers should be aware of are ones related to their buyer's financing, such as termite inspections for VA loans. According to HomeAdvisor, a termite inspection costs up to $280 and must be paid for by the seller on behalf of the buyer.
Finally, the single most substantial closing cost that sellers need to consider is the real estate agents’ commissions. The average real estate commission in Massachusetts is 6% of the sales price — with 3% going to the listing agent and 3% to the buyer's agent.
Who pays closing costs in Massachusetts?
Typical Seller Closing Costs
Many seller closing costs can be negotiated with the buyer — especially if you're in a seller's market, and your home is in high demand. However, it's important to remember that some costs, such as the real estate transfer tax, are dictated by the state and, therefore, not negotiable.
For a more specific idea of the closing costs, you may be responsible for, reach out to your real estate attorney or agent for guidance. Here is a general list of typical seller closing costs in Massachusetts:
- Title examination
- Mortgage payoff
- Mortgage prepayment penalty
- Settlement fee
- Transfer tax
- Outstanding homeowner costs
- Attorney costs
Typical Buyer Closing Costs
Closing costs for buyers are tightly related to the financing of their home and are therefore lower for cash buyers. Here is a list of the typical closing costs for buyers in Massachusetts:
- Credit report
- Financing fees (e.g., loan origination fee)
- Title fee
- Appraisal fee
- Title insurance (for the lender)
- Home inspection fee
- Survey fee
- Attorney costs
Should you pay the buyer's closing costs?
As of October 2019, Massachusetts is a hot seller's market, giving homeowners an advantage when it comes to negotiating with potential buyers. However, even in a seller's market, it can benefit sellers to contribute to the buyer’s closing costs. For example, if you covering some closing costs, the buyer can make a higher offer. Instead of paying thousands on closing day, they roll the expense into their mortgage.
It may also be wise to offer buyers a credit toward their closing costs if defects are discovered in your home during the inspection period. This can save you the hassle of making repairs, while also ensuring that your buyer doesn't walk away from the deal.
However, it's important to remember that not every issue can be fixed with credit. For example, buyers who purchase their home with an FHA loan are limited to sellers concessions of no more than 6% of the sales price.
Key Takeaways for Massachusetts Home Sellers
Here are some key takeaways that sellers in Massachusetts should keep in mind when selling their home:
- Closing costs vary: Homeowners in Massachusetts can expect to pay up to 4% in closing costs when selling their home — however, this figure can be affected by many factors.
- A licensed attorney must oversee real estate closings: Massachusetts law states that a real estate attorney must execute real estate transactions.
- Real estate commission is additional: Commission is not included in closing costs but should be budgeted for and will be due on closing day.
If you'd like to learn more about sellers closing costs in Massachusetts, speak to a local real estate agent or real estate attorney who can advise you on what to expect.
Also, if you'd like to save thousands of dollars in real estate commission when selling your home, consider working with a Clever Partner Agent.
Clever Partner Agents are experienced real estate professionals who provide sellers with a full-service listing experience for a fraction of the cost. For a flat fee of $3,000, or 1% if your home is worth over $350,000, working with a Clever Partner Agents could save you up to 50% on your real estate commission.