While most homeowners look forward to the profit from their home sale, it is actually quite an expensive endeavor. Sellers typically end up paying between 1% and 3% of their home's value in closing costs. Add to that the typical 6% real estate agent commission and you'll easily have to fork over several thousand dollars.
One of the best and easiest ways to reduce the costs due at closing is by using a discount agent. You can get the same stellar service from a licensed real estate agent and save as much as 50% on commission.
Are you still wondering about closing costs? What are they and how much can you expect them to be in Utah? Let's find out.
What are closing costs?
Selling real estate requires a team of professionals. From the home inspector to the appraiser to the recorder at the county clerk's office, there are many people who will have a role to play in your transaction.
Their time and effort are valuable, hence the closing costs that come along with real estate transactions. In order to cross all the t's and dot all the i's, buyers and sellers need to pay for closing services to ensure a smooth and legal transaction.
Closing costs are divided between the seller and the buyer with each being typically responsible for certain costs. Let's delve more into it below.
How much are closing costs in Utah?
A seller in Utah can expect to pay anywhere from 1-3% of their home's sale price. Remember that this is in addition to the 5-6% you'll have to pay in agent commission (if you go the full-price route). If you have enough equity, that money will simply be deducted from your profits. But be prepared to pay out of pocket if your equity is low.
Buyers, though they don't have to pay commission, typically pay more in closing costs; they should plan to pay between 2-5% of the sale price in closing costs.
How to Calculate Your Closing Costs in Utah
So if your home is in Utah, how much should you be planning to pay? According to August 2019 data from Zillow, the median home value in Utah is $344,000. If you're looking at 1-3% of this price, you should expect to pay between $3,440 and $10,320.
What's included in Utah closing costs?
Let's breakdown some common closing costs that may be included in your transaction. We'll also include a range of prices though remember that your actual cost could be higher or lower.
Home Inspection: $300–$500
An inspection lets buyers (and possible their lender) know if there are problems with the house. Buyers will usually request one to protect themselves to know what problems they will inherit with the home.
Home Appraisal: $450-$650
The home appraisal is required if the buyer is financing the purchase. Lenders want to ensure that the home is really worth the money they are lending for it. If the buyer defaults on the loan, the lender wants a valid asset they can seize and sell to recoup their investment.
Credit Report: $20-$50
Lenders will run a credit report on buyers to evaluate their creditworthiness for a loan.
Loan Fees: 0.5%-1.5% of the sale price
Loan fees not vary from lender to lender and depend on the loan option the buyer chooses. Most loans include an application and origination fee. The buyer may also choose to add prepaid interest or discount points that must be paid at closing.
Mortgage Payoff/Prepayment Penalty: Varies
Any remaining balance that the seller has on their mortgage must be paid at closing. Most mortgages include a clause that says it becomes due in full upon the transfer of the property to someone else. Once the collateral backing the loan goes away, they don't want to still be waiting for their money.
Some loans have penalties for paying the mortgage off early. Any applicable fees must also be paid at closing.
The lender often requires a survey of the property boundaries. This is to ensure that the boundaries are correctly delineated in the contract paperwork and there is no doubt about who actually owns what property.
Title Search: $300-$600
A title search is conducted to ensure that there are no outstanding liens or judgments against the property in question. This is also used to determine that the seller is actually the legal owner of the property.
Title Insurance: About $1000
You must buy title insurance in case anything pops up later that the initial title search didn't find. Both the buyer and the seller usually have to take out their own policy and each is responsible for their own premium.
Recording Fee: Varies
The recording fee varies by county and is charged to cover the cost of recording the deed transfer with the local government. For example, in Utah County, there is a $40 standard document recording fee.
Transfer Taxes: Varies
Transfer taxes also vary according to the local government. As of this writing, Utah does not have a transfer tax. However, there is a tax bill in the works that, if passed, will add a blanket 0.075% transfer tax to all residential and commercial real estate deals.
Real Estate Attorney: $150-$500 for attorney fee
Utah is not one of the handful of states that require a real estate attorney to be involved in the transaction. Regardless, it is a good idea to hire one. They will help to protect your interest and ensure that everything about the transaction is handled legally.
Household Costs: Varies
The running costs of the property will be prorated and the seller must pay everything up to the close date. This includes costs like utility bills, HOA fees, homeowner's insurance, and property taxes.
HOA Transfer Fee: Up to 1%
Some homeowner's associations in Utah get in on the action. The HOA may charge their own transfer fee, which can be quite hefty — up to 1%. If you belong to an HOA find out if your HOA charges a fee and negotiate who pays it.
Home Warranty: $300-$420
A home warranty covers the cost of repairing appliances that break down due to normal wear and tear. It is different from homeowner's insurance that only covers damages from disasters and not normal use. The seller typically pays for this as it protects them from being liable for the breakdown of any appliances soon after the transfer.
Other Home Selling Costs in Utah
Of course, closing costs for a home sale in Utah are not the only expense you need to worry about. Properly preparing your home for sale requires money.
Your home may need repairs or improvements to fetch full value on the open market. Additionally, marketing costs such as room staging and professional photography mean spending money upfront, but can lead to a higher sale price.
The help of an expert real estate agent is also vital to getting the best sale price for your home. However, that also comes with the cost of their commission. Sellers should factor in about 5-6% of your home's value for this cost to pay for both their agent's and the buyer's agent's commission.
Check out this handy calculator to find out the average commission seller's pay in Utah.
> Learn more: The Average Cost of Selling a Home in Utah
Who pays closing costs in Utah?
Everything in a real estate transaction is negotiable. That being said, there are a few costs that are typically paid by either the seller or the buyer. Let's look at a breakdown here.
Typical Seller Closing Costs
Costs that the seller is usually responsible for include:
- Home warranty
- Title insurance policy
- Household costs
- Transfer taxes and recording fees
- Mortgage payoff and prepayment penalty
- Attorney fees (if you hire one)
Typical Buyer Closing Costs
The bulk of the buyer's closing costs have to do with their loan. These costs can include:
- Credit report
- Loan fees
- Title search
- Title insurance policy
- Inspection fee
- Appraisal fee
- Survey fee
- Attorney fee (if they hire one)
Should you pay the buyer's closing costs?
This might seem like a silly question. Why would you want to pay the buyer's closing costs? But in some cases, it can benefit you.
For example, in a buyer's market you may be having a difficult time finding a buyer. The surplus of inventory (i.e. competition) keeps you from enjoying the number of prospective buyers that you would like. By offering to cover the buyer's closing costs you can incentivize buyers to prioritize your home over another.
Additionally, in an area with many FHA buyers, there may be few buyers who have enough capital to cover their closing costs. By paying for some of them yourself, you open up your sale to a larger pool of buyers.
In other cases, the buyer may ask you to cover closing costs. To incentivize you they offer an added $15,000 to the sale price while asking for $12,000 in closing costs. This effectively allows them to roll the costs into their loan and you earn a little extra money by helping them out.
Key Takeaways for Utah Home Sellers
In sum, closing costs are an important, albeit unloved, part of the home-selling process. Sometimes the uncertainty surrounding how much you'll have to pay causes a bit of anxiety. Ideally, you want to keep as much of your profits as possible and closing costs can take out a chunk.
A great way to save money is by using a full-service, discount agent. Save as much as 50% on agent commission and still get the same full service that is so essential to a successful sale. Instead of paying up to 6% in commissions (3% to the listing agent and 3% to the buyer's agent), by connecting with Clever, you can find a top agent who will sell your Utah home for $3,000 or 1% if your home sells for more than $350,000.
Reach out and we'll connect you with a knowledgeable, local real estate agent today.