Understanding Seller's Closing Costs


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The sum of the fees associated with the selling (or buying) of a home is referred to as the "closing costs." Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiable or dictated by local custom. Closing costs can vary depending on many factors such as purchase price, commission (typically paid by the seller), and the location. The practice of who typically pays for certain closing costs varies by geographical area in the state of California. It is important to understand what you are obligated to pay for under the Purchase Agreement. Make sure you read the Purchase Agreement carefully! Ask your Realtor® for a copy of the Purchase Agreement before you receive an offer on your property, so that you have time to review the Purchase Agreement and clarify any questions you might have.

What are the typical Seller closing costs?

Some typical seller closing costs may include the following. Note: what party pays for some of these costs may be negotiable under the Purchase Agreement, and not mandatory to be paid by either the buyer or seller.

If the seller has not yet paid for the house in full, the seller's most important closing cost is satisfying the remaining balance of their loan. Before the date of closing, the escrow officer will contact the seller's lender to verify the amount needed to close out the loan. Then, along with any other fees, the original loan will be paid for at the closing before the seller receives any proceeds from the sale.
Broker's commission
Transfer taxes
Documentary Stamps on the Deed
Title insurance
Seller's portion of the escrow holder's fee
Property taxes (prorated)
City and/or county inspection, including water conservation certificate (applies in certain areas only)
Homeowner's association transfer fee and fee to provide documents
Homeowner's association dues (prorated)
Pest control inspection and work to be done for clearance
Property taxes (prorated) - read further information below
Home warranty plan (aka home protection plan)
Gas earthquake safety shut-off valve (applies in certain areas only)
Other fees as per the Purchase Agreement
Miscellaneous fees (notary fees, messenger fees, etc.)

Can you negotiate who pays for closing costs?

In addition to the sales price, buyers and sellers frequently include closing costs in their negotiations. If a buyer does not have the cash for the down payment and the closing costs, then the buyer may offer to pay a certain price for the property in return for the seller paying some or all of the allowable closing costs. Ask your realtor for guidance when you are negotiating, and make sure that the terms are clearly written down on the Purchase Agreement.

How do prorations work?

At the closing, certain costs are often prorated (or distributed) between buyer and seller. The most common proration is for property taxes. This is because of the property tax due date. The seller is "charged" for that portion of the property taxes when they own the property, and the buyer's responsibility for the property taxes would typically start as of the date the buyer owns the property. The escrow holder would use the most recent property tax bill and at the close of escrow, the escrow holder would prorate the amount due between the parties accordingly.

Understanding the California property tax calendar

The property tax year (fiscal year) is from July 1 to June 30. Property is taxed as of January 1 for payment in the following fiscal year. Property taxes are paid in two halves: July 1 to December 31, and January 1 to June 30.
The first half of regular secured property tax bill (covering the period from July 1 to December 31) is due November 1st, and delinquent if not paid by December 10th at 5 pm (a postmark before midnight is considered timely).
The second half of the annual property taxes is due February 1st, and delinquent if not paid by April 10th at 5 pm (a postmark before midnight is considered timely).

Note: If the delinquent date falls on a Saturday, Sunday, or government holiday, then the due date is the following business day.

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