The Real Cost of Selling Your Home in Illinois
If you are ready to put your home on the market, there are a lot of things to consider. What is the value of your home? How quickly do you think you will be able to sell? What is the status of the real estate market in Illinois right now? While lots of constantly-changing factors will influence your home sale, there is one this that is certain: selling your home will cost you money.
The costs associated with selling real estate in Illinois are relatively fixed, so you can plan ahead by calculating your costs and including them in negotiations with agents and with potential buyers. In general, the fees, taxes, and closing costs that come with selling a home are linked to the purchase price for your property. A good estimate on your home’s sale price can go a long way in helping you plan.
Real Estate Commission
The commission you pay a real estate agent or brokerage firm will be one of the biggest costs associated with selling your house. Different firms charge different commissions: either a flat fee or percentage of the purchase price. For most brokerage firms, 5-6% of the sale price is a common commission. However, these costs are negotiable.
Just because commissions are negotiable, however, does not mean that you should go with the firm that offers the lowest commission fee. Commission fees cover different services based on the brokerage firm you choose, so it is wise to shop around. Commission may include services such as professional photography, listing postcards, social media marketing, a dedicated website for your home, open houses, and even staging costs. Compare marketing plans, agent experience, and past performance when choosing an agent and/or brokerage firm. Remember that any commission you pay will go to the seller’s brokerage firm and be split with the buyer’s brokerage firm.
If you have any outstanding balance on your mortgage, this will also constitute a large portion of your costs. Call your lender in advance and get the actual payoff for your mortgage. The actual payoff is likely higher than the remaining balance listed on your monthly mortgage statement once you take into account any interest prorated through the closing date, pre-payment penalties, and other fees.
If you have a line of credit, this will also need to be paid off. All liens must be satisfied at the time of closing, so it is important to include those costs in your calculation prior to selling your home.
In the State of Illinois, sellers are required to pay a transfer tax whenever real estate transfers ownership. This tax will be due before the deed can be recorded in the county where the property is located. The transfer tax is calculated based on the sale price of the property. Depending on the county, the transfer tax is usually between .25 and .50 per $500.00.
For example, if a home sells for $550,000, the transfer tax owed at the time of the transfer will be between $275.00 and $550.00. While the seller is generally liable to pay the transfer tax in the State of Illinois, it is common for the parties to negotiate that the buyer will pay the transfer tax instead.
Before real estate can be transferred, a title agent will generally have a third party title search conducted to confirm that there are no outstanding liens or encumbrances on the property. These “clouds” to clear title include mortgages, mechanics liens, outstanding judgments, code violations, and utility liens. Any such encumbrances will need to be resolved before the property can be sold. A title examination usually costs start around $1,700.
During the title examination, a third party will also confirm the chain of title. Chain of title looks back at the history of the property from the original owner to the current owner. This research verifies that, at each time that the property was transferred, the sale was done correctly and there are no clouds on the title.
After the examination is performed, the title company can issue title insurance. This protects the new owners of the home from any claims or defects in title that the examination may have missed. The cost of title insurance depends on the price of the home, and who pays for the title insurance will be negotiated between the buyer and the seller. Depending on the Illinois county in which the property is located, it may be customary for the buyer or seller to pay for title insurance. Make sure that this is discussed and settled during negotiations.
In Illinois, property taxes are paid in arrears. This means the tax bill is assessed for the year just completed. For this reason, home sales will generally include a prorated property tax credited to the buyer. At the end of the year, the buyer will properly pay the full year’s property taxes. For example, if the yearly taxes on your home are $4,000, and closing on your sale occurs in the beginning of April, then you will credit the buyer the taxes for the three months of the year before they purchased the home ($1,000). At the end of the year, the buyers will pay the full $4,000 property taxes owed.
Up until this point, the costs have been pretty predictable. In general, these are the baseline costs you can expect when selling your home. However, the rest of the costs discussed in this article may be the buyer or seller’s responsibility. These will be points of negotiation as you settle on a final sale price. Make sure that all costs are discussed, negotiated, and formalized in a purchase agreement.
Buyer’s Closing Costs
If the buyer is going to be getting a mortgage, he or she may try to get you to help with closing costs. Most mortgage lenders will allow the seller to pay a percentage of the buyer’s costs. When discussing these additional costs, make sure you are aware of your costs so far so that you know how much room you have to negotiate.
Home Warranty Fees
Some sellers may choose to offer a home warranty if there are some components of the home that are a little worn out (air conditioning, water heater, etc.). Including a home warranty policy is completely optional, but it might make your home more competitive in the market. A one year home warranty policy costs between $375 and $600.
Some mortgage lenders will require the buyer to obtain a pest inspection prior to purchasing. Specific loans (including VA loans) will actually require that the seller pay for the pest inspection. These kinds of inspections typically cost $100-$150.
Once you near closing, there will be fees associated with drawing up the closing documents and representing you in the closing process. While it is not required that you hire a real estate attorney to represent you in the closing process, it is highly recommended. Your attorney can draft, review, and prepare all legal documents for closing, as well as negotiate on your behalf.
Throughout this process, there are likely to be other small, miscellaneous charges that arise. We advise that you plan to spend at least a few hundred dollars on unexpected costs. These may include wire transfer, estoppel, and courier fees.
Speak With An Experienced Illinois Real Estate Attorney
If you are thinking about selling your home in Illinois, schedule a call with our experienced real estate attorney today!