When sellers sit down to estimate the proceeds from their sale, they need to factor in their closing costs. Between all the fees, taxes, and other expenses involved in a closing, it can become hard to keep track of.
The total amount can vary depending on the total sale price, but as a general rule, you should be prepared to pay between 7-10% of the sale price in closing costs. This means for a $3 million home, you would pay roughly between $210,000 and $300,000 in closing costs.
To give you a better idea of what goes into this and what to expect, here’s quick breakdown of the major expense sources.
Major Closing Costs for Sellers
1. State and Local Conveyance Tax
Average Cost: Roughly 1-2% of sale price. Depends on amount of sale price and municipality.
The conveyance tax rates vary between states, and Connecticut’s is on the higher end among all states. The state uses a tax bracket structure that bases the tax rate on the value of the property transferred. It goes as follows:
- .75% of the first $800,000 The State collects .75% of the first $800,000
- 1.25% on all amounts between $800,000 $2,500,000
- 2.25% on all amounts above $2,500,000.
Someone, for example, selling a $3 million house would pay $38,500 in conveyance tax to the state: ($800,000 x .0075) + ($1,700,000 x .0125) + ($500,000 x .0225).
Sellers also have to pay a local conveyance tax, which is .25% of the sales price in the vast majority of Connecticut towns. There is a select group of towns that charge a rate of .5%. They are Bloomfield, Bridgeport, Bristol, East Hartford, Groton, Hamden, Hartford, Meriden, Middletown, New Britain, New Haven, New London, Norwalk, Norwich, Southington, Thomaston, Waterbury, Windham.
Stamford also imposes rates higher than the .25% base rate. Homes sold for up to $1 million have a conveyance tax of .35%, and homes sold for over $1 million are taxed at .5%.
2. Realtor’s Fee
Average Cost: 5-6% of sale price
In Connecticut, the seller usually pays the realtors fees at closing, and the total fee is typically around 5-6% of the sale price. That total is split between the seller and buyer’s realtor (assuming both had one).
For a $3 million home, the total realtor fees would amount to roughly between $150,000 and $180,000.
3. Attorney’s Fee
Average Cost: $1,000-$2,500
Sellers in Connecticut work with an attorney to conduct their closing. A qualified real estate attorney will ensure the process goes smoothly by preparing and reviewing all legal and tax documents and anticipating any issues before they arise.
Attorney fees will vary, but be prepared to pay at least $1,000. Don't hesitate to ask an attorney for their rate beforehand. It’s also wise to get the agreed-upon fee in writing.
Read: 5 Questions You Should Ask Before Hiring a Real Estate Attorney
4. Recording Fee
Average Cost: $60-$200
Sellers have to pay fees to record certain documents, including the releases of their mortgages. The fees to record documents can vary depending on document type and number of pages. Typically, the first page of a document is $60 and each additional page is $5. If recording a “MERS” Mortgage Electronic Registration Syste 1 ms document, the charge is $159 for the first page and $5 for additional pages.
Other Costs Sellers Should Consider
1. Unpaid Mortgage Payoff
Average: Varies
While this isn’t really a closing cost per se, your unpaid loan balance will be taken out of your sale proceeds at the time of closing.
Your amount owed typically also includes a portion of your monthly payment, which you would normally pay the first of the month following your closing. For example, if you close on April 15, you will owe two weeks' worth of your monthly mortgage payment for April, which is money normally due May 1.
2. Outstanding Real Estate Taxes and Water/Sewer Bills
Average: Varies
Like the mortgage payoff, this isn’t technically a closing cost, but keep in mind that you will need to pay off any outstanding water and sewer bills, as well as real estate taxes.
In many cases, though, buyers will reimburse sellers for a portion of the real estate tax that the seller has already pre-paid. For example, if a house is sold on April 1 and the seller prepaid property taxes on Jan. 1, they will get reimbursed from April 1 to June 30. Connecticut's tax year begins July 1 and payments are made quarterly or semi-annually depending on the town.
3. Sellers Concessions
Average cost: Varies, not required
In some cases, a seller will provide the buyer what’s called a seller credit at closing. The purpose of this credit can be to cover the buyer's out-of-pocket closing costs, pay for repairs identified during the home inspection, or simply to incentivize the buyer to move the deal along faster.
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