The Ins and Outs of Closing Costs for Home Sellers in Ann Arbor

Selling a home is a big move, but it comes with expenses that might take you by surprise. Picture this: you're ready to finalize the sale of your Ann Arbor home, expecting to pocket a significant sum, only to see a chunk taken out for closing costs. If you aren’t prepared, these costs can significantly reduce your profits.

Let’s break down the costs you might encounter as a seller in the Ann Arbor area, why they matter, and how you can keep more money in your pocket.

What Are Closing Costs?

Closing costs are the final expenses you need to pay to complete the sale of your home. They include everything from title transfers to legal fees. On average, sellers in Ann Arbor can expect to pay between 6% and 10% of their home’s sale price in closing costs.

Being aware of these costs can help you budget accordingly and avoid any last-minute surprises.

The Most Common Closing Costs for Home Sellers

1. Real Estate Agent Fees

Real estate commissions remain a key expense for many sellers, but recent changes have made them more flexible and negotiable. Sellers are no longer required to cover the buyer’s agent commission, and all commission agreements must be clearly disclosed and agreed upon upfront.

How Much Do Commissions Cost?

Traditionally, commission rates ranged from 5% to 6% of the sale price. However, with the new rules, commission structures vary more widely and are subject to direct negotiation between sellers, buyers, and agents.

Who Pays the Commission?

• Sellers may still choose to pay the buyer’s agent commission, but it is no longer an industry standard.
• Some buyers may now be responsible for paying their own agent’s commission.
• Listing agents still charge a fee for marketing, negotiations, and transaction management, but the rate is now more customizable.

2. Transfer Taxes and Recording Fees

Transfer taxes are state and local fees for transferring ownership of your home.

• Cost: These taxes can range from 0.5% to 2% of the sale price, depending on local regulations.
• Responsibility: Typically, the seller covers this cost in Michigan, though it can be negotiated in the sales agreement.

3. Title Insurance (Owner's Policy)

Title insurance protects the buyer from legal claims or ownership disputes. Though buyers usually purchase their own policy, sellers often cover the cost of an owner's policy.

• Is it mandatory? No, but it’s commonly expected in home sales.
• Cost: Typically between 0.5% and 1% of the house's sale price.

4. Escrow and Closing Fees

Escrow services manage the funds and documents involved in the transaction. These fees also cover the preparation of final paperwork to transfer ownership.

• Role of Escrow Companies:
• They hold funds in a secure account.
• They ensure all terms of the contract are met before releasing funds.
• Cost: Typically between $500 and $2,000, depending on the provider.

5. Prorated Property Taxes

Since property taxes are paid annually, sellers must cover their share up to the closing date.

• Calculation: The total property tax is split based on the number of days the seller owned the home during that year.
• Example: If annual property taxes are $6,000 and you sell midway through the year, you would owe $3,000 in prorated taxes.

6. Homeowners Association (HOA) Fees

If your property is part of an HOA, additional fees may apply at closing time.

• Unpaid Dues: Any outstanding fees must be settled before closing.
• Transfer Fees: Some HOAs charge between $200 and $1,000 to process the ownership transfer.

7. Attorney Fees (If Required)

In some states, hiring a real estate attorney is mandatory to review and finalize the sale. This is recommended in certain complex transactions.

• Cost: Generally between $500 and $1,500.
• What They Do:
• Review all contracts and closing documents.
• Ensure everything is legally compliant.

How to Reduce Your Closing Costs

Closing costs can take a sizable chunk out of your home sale profits, but the good news is that there are ways to cut back on these expenses. Whether through negotiation, strategic choices, or finding cost-effective service providers, you have options to keep more money in your pocket. Here are some practical ways to lower your closing costs as a seller.

Sell Without an Agent (FSBO) — this means no listing agent commission. However, you’ll still need to:

• Pay the buyer’s agent commission (usually 2.5% to 3%).
• Handle marketing, negotiations, and paperwork yourself.

FSBO works best if you have experience in real estate or a buyer already lined up.

Ask the Buyer to Cover Some Costs

• In some deals, buyers agree to cover certain closing costs instead of negotiating a lower sale price.
• This works best in a seller’s market, where buyers compete for homes.

Shop Around for Service Providers

• Get multiple quotes for title insurance, escrow services, and attorneys.
• Some companies offer discounts for bundled services.

Preparing for Closing

As you approach the finish line of your home sale, there are still a few final steps to take before closing day. Proper preparation can help avoid last-minute surprises and ensure everything goes smoothly. Here’s what you need to do before handing over the keys.

1. Review the Closing Disclosure Early

• You’ll get a Closing Disclosure a few days before closing that lists all costs.
• Review it carefully to catch any unexpected charges.

2. Finalize Repairs and Paperwork

• Complete any agreed-upon repairs before closing.

Make sure liens, HOA fees, and taxes are paid to avoid delays.

Final Thoughts

Selling a home in Ann Arbor involves more than finding a buyer. Closing costs can add up quickly, but by knowing what to expect and planning accordingly, you can retain more of your profit from the sale.