What are Seller Closing Costs in California?

What are seller closing costs in California?

How Much are Typical Seller Closing Costs in California?

And how to save approximately $16,500 in real estate commissions on a typical $550,000 CA home at closing by selling your home For Sale By Owner on Houzeo?

Congratulations! You’ve made it to the finish line. Closing on a home can be one of the most exciting moments as a seller, but it can also be a stressful one if you aren’t prepared. California is one of the most expensive states when it comes to the closing costs. Various regulations also make it one of the most tedious states. As a Houzeo For Sale By Owner (FSBO) Seller, we expect you to go to your closing prepared. Our comprehensive California FSBO Home Seller Guide will help you accomplish exactly that.

In this section we’ll discuss the key documents and expenses you need to be aware of when closing on a home in California.

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Seller Costs Statement

Image 1: A Houzeo Seller’s Actual Estimated Statement of Seller Closing Costs – Savings of $18,725 with NO Listing Agent Commission!

 

What Are the Different Home Seller Closing Costs in California?

Here are the typical closing costs in California, ordered by how big they are.

  1. Mortgage Payoff: If you have a mortgage, the payoff will likely be the biggest item on your closing statement. It includes items like the principal balance, interest accrued from the last payment to the day of closing, recording fee, and any statement fee the lender might charge.
  2. Real Estate Broker Commissions: The biggest expense in the US, when selling your property is the broker/agent commission. In California, the typical commission is between 5-6% with generally half going to the listing agent and the other half to the buyer’s agent. If you’re selling FSBO via Houzeo, congratulations… You’ve likely saved thousands by paying $0 in listing agent commission! Go on. Pop a bottle of the finest Champagne or Scotch. You deserve it.
  3. Property Taxes: Depending upon when you close escrow, you may need to pay the buyer a prorated amount of property taxes, or the buyer may need to credit you.
  4. County/City Taxes: Transfer taxes in California are customarily paid by the seller, but the sellers can negotiate that the buyers pay a part or the entirety of these taxes. Several jurisdictions in California charge hefty transfer taxes when property changes hands. For example, transfer taxes in San Francisco can be as high as 3% of the sale price. In the city of Los Angeles, the transfer taxes can add up to 0.56% of the sale price.
  5. Escrow Fees: Escrow in California is a neutral third party that handles the transfer of the deposits, documents, funds, and other key items in a closing. Typically, Escrow charges are around $2.00 for every $1,000 of the sales price, plus $275 flat fee. So if your home sells for $1,000,000, and you live in a county that requires the seller to pay, you’ll pay an escrow fee of roughly $2,275.
  6. Seller Disclosures and Related Expenses: Sellers in California usually provide two disclosures that may require third party services.
    1. Natural Hazards Disclosure Report: Most offers in California will require that the seller provide a natural hazard disclosure report. This report is required by California state law and tells the buyer if your home lies within a zone containing any of the below six hazards. Escrow will generally recommend a third party company who will review records and provide you with information to fill out this report. The typical cost is around $100. The 6 hazards are:
      1. A Special Flood Hazard Area
      2. Dam Inundation
      3. Very High Fire
      4. Wildland Fire
      5. Earthquake Fault Zone, and
      6. Seismic Hazard

        Image 2: Rare Case of Buyer Waiving Termite Inspection

        Image 2: Rare Case of Buyer Waiving Termite Inspection

    2. Termite Inspection & Remediation: Termite inspections are typically not mandatory in California, but most buyers will ask for it. Some lenders do require that termite inspection be submitted to them. We recommend you obtain a termite inspection as early on in the process as possible. They are generally inexpensive, and if termites are found, the sooner you do the remedial work the better.
  1.  Seller Paid Home Warranty: Buyers in California will often ask for home warranty and the sellers generally agree to providing it. It generally comes in around $500 to $800, depending upon the insurance company, coverage, and area.
  2. HOA Dues, Document Fees, and Transfer Fees: If the property falls under a Homeowners Association, you may be subject to various other charges. These include HOA dues, a document fee at the beginning of Escrow, and a transfer fee at the end of Escrow.

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How Should I Prepare for My California Home Closing?

Your closing agent will schedule a date for your closing. Here’s how to prepare for your closing day.

  1. Review Your Closing Documents in Advance: Closing documents should generally be available to you in advance of the scheduled closing date. Review these documents at length and understand their provisions. Here are some key documents you’ll likely sign at closing:
    1. The HUD-1 or Closing Disclosure: Most California homes are purchased with a mortgage. If this is the case on your transaction, you’ll get the Closing Disclosure summarizing the costs in detail. If your transaction is all cash, you may get the HUD-1, although this is less common. These documents detail amounts you’re being charged for, your loan payoffs if any, and the net proceeds you will take to the bank. Remember, depending upon how much equity you have in the property, you might be asked to bring a check (or send a wire) on the closing date. Ensure there are no typos in your name, address, property address, bank info, and other details. Then review every amount and the totals to ensure there are no mathematical errors or inadvertent costs. You’ll be surprised how many times these documents have errors – this is one of the reasons our founder launched Houzeo.
    2. The Deed: This document enables legal transfer of title from the seller to the buyer. Read this document carefully, verifying all details including the legal description of the property, the deed book, deed book page, and the Property Identification Number (PIN), if any. We know of a case where a Seller sold a $94,000 property, but the deed also legally transferred over the Seller’s 5 other homes worth $680,000 over to the Buyer. There was a huge scramble post closing to correct this mistake. It could have been a nightmare for the Seller if the Buyer didn’t honestly transfer the rest of the properties back to the Seller.
    3. Statement of Closing Costs: This statement summarizes all the expenses involved in the transaction. This document is easier to understand vs. the HUD-1/Closing Disclosure, but they should tie.
    4. Certificate of Title: Allows you to state that you have the right to sell the property.
    5. Loan Payoff: If you have a mortgage, this document details how it’ll be paid off. Make sure to call your lender to confirm the details on the statement you receive from your Escrow agent.
    6. Mechanic’s Lien Waiver: This document asks you to swear that there is no security interest in the title to the property for the benefit of those who have supplied labor or materials to improve the property.
  2. Ask Questions: If this is your first time selling a property, schedule an appointment with the closing agent before the date of the closing. Prior to that appointment do your research and ask clarifying questions on anything you have doubts on.
  3. Bring TWO Forms of Official ID: There will likely be a licensed notary involved who’ll require that you swear you are who you say you are. Take a valid driver’s license or passport for ID. Carry a secondary ID as well, just in case.

Now you’re ready! You might’ve heard horror stories of people being blindsided by high closing costs in California – but that’s often the result of not preparing and educating themselves ahead of time. If you are a Houzeo For Sale By Owner Seller in California, we want you to be one of the most educated home sellers out there. Next step, log on to Houzeo.com and list your home for sale by owner. You’ll be in full control of your listing, and save thousands in the process!

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