During the last part of the home selling process (a.k.a. closing), both buyers and sellers pay closing costs that cover expenses related to finalizing the sale.
Sellers in Tennessee pay an average range of 1-3% of their home's sale price in closing costs. This is on top of the state's average 6% realtor commission rate, meaning in total, you can expect to pay 7-9% of the total cost when you close on your home sale.
These costs are not insignificant, to say the least. Thankfully, there's a way to save money while selling your home.
Clever connects you with top-rated agents across Tennessee who charge reduced commission rates. This way, you get all the experience you expect from a full-service realtor while saving up to 50% on seller's commission fees.
> Reach out to get connected with top-rated realtors in your area.
In the meantime here's everything you need to know about closing costs in Tennessee.
What are closing costs?
Closing is the final step in selling a home, during which, the buyer and seller complete official paperwork and settle the purchase. This process is facilitated by third parties, such as a title company, escrow company, and/or attorney.
The buyer and seller are both responsible for closing costs. The seller's mostly cover taxes, fees to transfer ownership, and outstanding bills on the property. For the buyer, closing costs mostly go towards their lender's requirements.
How much are closing costs in Tennessee?
You can expect to pay about 1-3% of the final price in closing costs when you sell your home, while the buyer will typically pay 2-5%.
You should remember, that as the seller, you will usually be responsible for the commissions of both your own agent and the buyer's agent, which can add 6% of your final price onto what you pay on closing day.
How to Calculate Your Closing Costs in Tennessee
So how much can you actually expect to pay at closing? Let's look at an example.
As of September 2019, the median home value in Tennessee is $169,700. On a similar house, you could expect to pay $1,697 to $5,091 in closing costs on a typical home sale in Tennessee (1-3% of the price).
Keep in mind that tools like Zillow's Zestimates can provide a ballpark idea of average home prices in your area, but come with a margin of error.
To get the most accurate sense of your home's market value, talk to an experienced realtor. They can give you a good idea of what you'll get for your home and what kind of closing costs you should budget for.
What's included in Tennessee closing costs?
While buyers and sellers normally have different expenses to cover, everything is negotiable. A buyer can request you pay some of their closing costs. Because of this you need to be familiar with buyer and seller closing costs. The following closing costs typically apply in Tennessee.
Title search: $300-$600
A title search checks to make sure that you are the legal owner of the property and that the title is clear of liens or back taxes owed.
Title insurance: Varies, $1,000 on average
Title insurance protects the buyer from financial losses in case any outstanding liens were missed during the title search and turn up after purchase. The cost depends on the price of the home. For a home worth the median Tennessee value of $169,700, title insurance would cost around $1,000.
Home inspection: $300-$500
Home inspection is carried out before closing and checks for any issues with the house's structure or its systems.
Termite inspection: $75-$125
Since these wood-destroying insects are prevalent in the region, termite inspections are common (though not required) in Tennessee. A pest inspection costs an average $75-$125.
Appraisal assesses the house's value in order to verify that it is worth the amount the buyer is requesting to borrow. Since the fee is paid directly to the appraiser, it is nonrefundable even if the loan cannot be secured.
Survey: $350-$500 (or $50 for affidavit)
Usually requested by the buyer's lender, a survey determines the property's legal boundaries. Costs vary depending on your lot size and property.
In Tennessee, the seller may substitute a survey affidavit swearing the property's boundaries did not change during their ownership. A survey affidavit costs about $50.
Credit report: $25-$50
The cost for the mortgage lender to verify the buyer's credit history.
Loan payoff costs: Varies (around 0.5-1.5% of the home sale price)
These costs include loan application and assumption fees, loan origination fees, and prepaid interest for the first month.
Mortgage payoff and prepayment penalty: Varies
The sellers will pay any remaining balance on their home mortgage at closing.
Some lenders charge a penalty for prepaying your loan before the end of its term. To see if there are any such penalties, and what the cost will be, check with your lender.
Outstanding amounts owed on the property: Varies
These include outstanding bills such as property taxes, utilities, homeowners insurance, and HOA fees. These are prorated to the date of close.
Transfer taxes: Varies
This is a tax charged for transferring your home's title to someone else. Tennessee charges a rate of $0.37 per $100 of the property sale price. So if your home sells for $100,000, you can expect to pay $370 in transfer taxes.
Recording fees: Varies (around $100)
This fee covers your title company, escrow agent, or attorney filing the deed of property transfer with the county. Fees vary from county to county, but are usually around $100.
Settlement fee: Varies (around $2 per $1,000 of the sale price)
In Tennessee, the closing is usually carried out by a title company representative which amounts to about $2 per $1,000 of the sale price. If it is carried out by an outside attorney, these fees vary.
Tennessee mortgage tax: Varies ($0.115 per $100 of amount borrowed)
Tennessee assesses a mortgage tax (officially called the Tennessee recordation tax) at a rate of 11.5 cents per $100 of the amount borrowed.
Other Home Selling Costs in Tennessee
While the buyer handles more of the closing fees, you'll still need to pay significant costs when selling your home, including realtor commissions, and repairs.
If the inspection raises any issues that need to be repaired before the sale, you'll be on the hook. Even for smaller cosmetic or maintenance fixes, the buyer will probably ask you to cover some or all of the cost.
As the seller, you'll also be responsible for paying all commission fees — for both your agent and the buyer's agent. On average, these cost 6% of the home's sale price.
Who pays closing costs in Tennessee?
Typical Seller Closing Costs
For the seller, closing costs mostly cover paying off bills and payments owed on your home, as well as fees for transferring ownership of your home to the buyer. These include:
- Mortgage payoff and prepayment penalty (if applicable)
- Recording fees
- Settlement or attorney fees
- Buyer's title insurance
- Outstanding amounts owed on the property, such as HOA fees and utility bills
Typical Buyer Closing Costs
The buyer's expenses at closing are mostly related to securing a mortgage and satisfying lender requirements. These costs include:
- Origination fee
- Application fee
- Credit report fee
- Title search fee
- Lender's title insurance
- Home inspection fee
- Appraisal fee
- Prepaid interest
- Mortgage tax (Tennessee recordation tax)
- Transfer taxes
- Survey fee (if applicable)
- Escrow fee (if applicable)
- Attorney fees (if applicable)
Should you pay the buyer's closing costs?
In some cases, sellers offer to pay the buyer's closing costs. This is typically done to generate interest in a slow market and make the home more appealing to potential buyers.
Although Tennessee is seller's market, you still could consider covering some of the buyer's expenses if it helps push a sale across the finish line.
Key Takeaways for Tennessee Home Sellers
Keep in mind that selling your home will probably cost more than you expect.
Since you'll be paying for commission fees, closing costs, and repairs, you'll want to budget accurately — and save as much as much as you can in the process.
With Clever, you can get expert advice on how to plan for closing and save big on seller's commission fees.
Clever Partner Agents come from top brokerage companies like Keller Williams, RE/MAX, and Century 21, and work for a flat fee of $3,000 or 1% on sales over $350,000. This lowers the overall cost of selling your home by thousands without compromising the quality of service and support you receive from your agent.
Connect with Clever to find out how much you can save on closing day.