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What sellers can expect to pay and how sellers can reduce how much they spend on closing costs.

Whether you are placing your home on the market in Cuyahoga County, Summit County, or the Greater Cleveland Area, you will calculate how much you expect to net from your sale.  Many sellers who sell their property with a real estate agent are surprised when they walk away from the closing with less money than they anticipated.  The most common reason for this surprise is a misunderstanding of the various expenses sellers incur in connection with a property sale. 

The following provides detail on many of the costs a seller will be responsible for in connection with a sale, some of which will be fixed costs and others a percentage of the sale price.  My hope is that this will help you plan and set appropriate expectations for what you will net from a transaction, so there will be fewer surprises. 

The Numerous Costs Eating Away at Your Profits as a Seller

(in Cuyahoga County, Summit County, Portage County and the Greater Cleveland Area)

Closing costs are handled as debits and credits through escrow, not as out of pocket payments by the seller and buyer.  The practical effect of the way the transaction is structured is that (except in less common circumstances) the seller does not pay any money into the escrow account.  Instead, the closing costs are deducted from the purchase price by the escrow company on a ledger called a, “settlement statement.”  At the bottom of the ledger, it will read something like, “Balance Due to Seller:” followed by the total sum the seller will receive at closing.  By carefully reviewing the settlement statement line by line, sellers can clarify any discrepancies and/or questions with their escrow officer and insure they have a complete understanding of all charges.

The closing costs and settlement charges paid by sellers will typically include the following:

Commission

As a seller you are responsible for 100% of the real estate agents’ commission even though the commission is paid to both the buyer’s agent and the seller’s agent.  The total you will spend on commission will typically be 5 to 6 percent of the sale price (Hint: if your agent initially tells you they want 6%, always ask if they will do it for 5%).  So, as an example, if your home sells for the median sale price in Cuyahoga County as of July 2022 (i.e. $202,500.00 according to Realtor.com), you will pay between $10,125.00 - $12,150.00 in commission.

Title Insurance

In Cuyahoga County, Summit County, and Portage County, the seller will typically split the cost of the buyer’s title insurance policy 50-50 with the buyer.  While we have a go-to title company for all of our transactions, we have surveyed multiple other title companies over the years to make sure the one we use is in line with typical pricing.  We have found that the total title insurance charge is typically between 0.55% and 0.58% of the purchase price.  Based on the median sale price in Cuyahoga County, that would mean between $1,113.75 - $1,174.50 in total title insurance costs for a median-price sold home, which sum would then typically be split between 50-50 with the buyer and seller. 

Transfer Tax and Conveyance Fee

In Cuyahoga County, Summit County and Portage, sellers are charged a “conveyance fee” equal to 0.4% of the purchase price when they sell.  The 0.4% conveyance fee is comprised of 0.1% which goes to the State of Ohio and 0.3% which goes to the County.  Based on the median sale price in Cuyahoga County, this equates to a fee of $810.00 for a median-price sold home.  Unlike the cost of title insurance, the norm if for the seller to pay 100% of this fee. 

Escrow Fees

Escrow fees (also sometimes referred to as the settlement fee) are a flat fee that escrow companies charge in exchange for their service managing the transaction from opening escrow all the way to closing the deal.  You will see some modest variability between escrow companies in terms of what they will charge.  In Cuyahoga County and Summit County, we see escrow companies charging between $525 - $750 in total, with this sum usually divided 50-50 between buyer and seller.   Hint: If you get quoted on the higher end of that range from an escrow company, call around for a better price.  Just make sure the escrow company you choose has been around for many years and has a good reputation (get word of mouth referrals from investors and experienced realtors).  A bad escrow officer and/or escrow company can be a real nightmare in a transaction. 

Prorated Property Taxes 

This one tends to confuse sellers and buyers alike.  The general idea with respect to the proration of property taxes is that the seller pays the taxes attributable to the period of time that the seller owned the home. 

Cuyahoga County (including Cleveland, Berea, Brook Park, Cleveland Heights, University Heights, Solon, Beachwood, South Euclid, Shaker Heights, Lakewood, Rocky River, Berea, Independence, Valley View, Seven Hills, Mayfield Heights, Lyndhurst, and North Olmsted), Summit County (including Twinsburg, Macedonia, Hudson, Northfield, Cuyahoga Falls) and Portage County (including Aurora and Streetsboro) bill for property taxes in arrears, with property taxes for January through June of the prior year due and payable in January of the current year (e.g. property taxes for January – June of 2021 are due in January of 2022), and taxes for July through December of the prior year are due in July of the current year (e.g. property taxes for July through December of 2021 are due in July of 2022. 

With the above in mind, you can see that even if a seller has paid both tax bills issued to them by the county in any given year, they have only paid property taxes covering the previous year.  That means they have not paid property taxes attributable to the time they have been living in the home in the year that the sale takes place.  This is where sellers often can be surprised by their pro-rated property tax obligation.

To eliminate the potential surprise, keep the following example in mind:  If you were to sell your home in the first half of 2023, your purchase price proceeds will be reduced by (1) the property taxes owed as set forth in the property tax bill due in January 2023 (remember, this covers the first half of 2022), (2) the property taxes that would be owed as set forth in the tax bill due in July of 2023 (remember, this covers the second half of 2022 when you were still living in the home), and an additional pro-rated sum for taxes that would be owed for the period of time before closing (e.g. if you were set to close on March 1, 2023, you would be debited a daily rate for property taxes attributable to January 1, 2023 – February 28, 2023). 

Additional Escrow Charges

As the seller you will also typically see the following charges (with some variability amongst escrow companies) on your side of the settlement statement ledger:

Title Exam Fee: $100.00 - $175.00

Deed Preparation Fee: $100.00

Transfer Fee: $25.00

Courier/Mail Fees: $20.00 - $35.00

Wire Fees: $20.00 - $35.00

Release/Tracking Fees: $25.00-$35.00

Lien Release Fee (if you have an existing mortgage on the home): $25.00 - $35.00

Holdback for Final Water & Sewer Bills: Will vary.

Closing Protection Insurance (CPL): Will vary but can be waived upon request. 

Total: $315.00 - $435.00+

Concessions

In this slowing market where some leverage in the negotiations has shifted back to buyers, one thing we expect to see (and are already seeing) more of are concessions that sellers will need to offer buyers in order to seal the deal. 

In the above paragraphs we have focused on the seller’s side of the settlement statement, but the buyer also has a slew of costs on their side.  In that vein, one form of concessions that buyers request are credits toward their own closing costs.  This often comes in the form of a lump sum (for example, the seller is asked to provide $2,500.00 in closing cost assistance to the buyer).  When that occurs, there will simply be another line item on the seller’s side of the settlement statement showing a reduction of the net proceeds by $2,500.00, and the buyer’s closing costs will be reduced by this amount. 

Other concessions that can show up and reduce the seller’s net proceeds include seller credits for repairs and point-of-sale items.

Loan Payoff

While this goes without saying, except in those rare circumstances where the seller’s lender allows the buyer to assume any existing mortgage on the property (and the buyer is agreeable to that approach), the seller will need to use the purchase proceeds to pay off their mortgage before title can transfer to the buyer.  This will almost always be the largest reduction of your net proceeds from the sale. 

How to Save on Closing Costs

First, shop around when selecting an escrow company to use.  Prices do vary on many costs.  However, you do have to be cautious because not all escrow companies/escrow officers are created equal.  Far from it, in fact, and a bad escrow officer can really wreak havoc on a transaction and on your stress levels.  So don’t pick the cheapest company you find just because it is the cheapest.  Get word of mouth referrals from trusted sources and speak with the company you might go with before selecting them. 

Another way to save big on closing costs is to sell to a cash buyer who not only offers to pay many of the seller-side closing costs, but who will allow you to completely remove any realtor commissions from your costs.  As a husband-and-wife team of cash buyers at LP Property Group, we have been able to help sellers in Cuyahoga County, Summit County and Portage County not only save on closing costs, but to also close on their sale quickly, with no realtors or lenders slowing down or potentially killing the deal and few or no contingencies to the closing.  We would be happy to speak to you about your property and see if we can be of any help.

Best of luck in your sale!

Josh has been a real estate investor since 2011, and owns/operates single-family, multifamily, and commercial real estate in multiple markets in Northeast Ohio with his wife and partner, Elina.  When they are not onsite managing construction projects, getting their hands dirty fixing things, and touring neighorhoods and properties, Josh and Elina can be found walking in the Metroparks, enjoying ice cream at Mitchell’s, pretending to work out at LifeTime Fitness and traveling. 

Disclaimer: The above is solely intended for informational purposes and in no way constitutes legal advice or specific recommendations.