Home sellers rarely forget to calculate how much they’ll make from the sale of their home, but they do often forget to factor closing costs into the equation. Because they come at the end of the sale and aren’t always clear, closing costs can sneak up on you, resulting in a substantial loss of money when you least expect it.
One of the first things we do when advising home sellers is to go over each and every cost they will be responsible for – including those that aren’t always obvious or top of mind, like closing costs. Closing costs are the collection of fees, expenses, and charges associated with selling a home. The amount of closing costs will vary depending on the price of the property, the type of loan, the lender, and various other factors.
Sellers often get blindsided at the closing with costs they never knew they were responsible for paying. That’s why it’s so important to have a real estate agent on your side walking you through each step of the process (especially the closing process and its associated costs) so you can be as prepared as possible.
Let’s take a detailed look at the closing costs associated in selling a home in Massachusetts.
Massachusetts Tax Stamps
One of the biggest and often overlooked expenses is the Massachusetts Tax Stamps. Once you have lived in Massachusetts for a while, you start to realize that just about everything gets taxed; however, most home sellers in Massachusetts do not realize there’s a tax on selling a home if they they have never sold a home in the state before. This tax on selling a home is known as the Massachusetts Tax Stamps. In the majority of the state, the tax stamp equals $4.56 per thousand dollars of the sale price of the home. For example, if you sell your home for $300,000, you would owe the State of Massachusetts $1,368.00 ($4.56 x 300). The money paid for the tax stamps is income given to the registry where your home is located, and is given to the Commonwealth of Massachusetts Department of Revenue. While most of Massachusetts – including Middlesex, Worcester and Norfolk counties – it should be noted that in Barnstable County, the tax rate is $5.70 per thousand, which means the cost involved with selling a property is slightly higher in that district. The Dukes and Nantucket counties also charge an additional 2% of the sales price that gets forwarded to the local land bank commission.
Massachusetts Real Estate Commission
Real estate commissions paid to your agent(s) are, of course, the largest expense in selling your home. That said, commissions are not the same across the board and can be negotiable depending on the brokerage firm. An individual Realtor working for one company may have a completely different rate than a Realtor working for another. Generally speaking, most full service real estate companies will charge anywhere from 4% to 6% commission.
Massachusetts Attorneys Fees
We strongly recommend that all of our clients have an attorney review every document involved in their transaction. The expense of having a competent attorney representing your interests is cheap in comparison to the cost of problems that could arise without proper representation. A real estate attorney can do everything from the review of legal documents – such as the offer contract and the Massachusetts Purchase and Sale agreement (P&S) – to attending the closing (either with you or with power of attorney in hand). Keep in mind: It is illegal for a realtor to give legal advice. Most buyers will have an attorney who makes changes to the standard P&S, which means you will be putting yourself at risk without a complete understanding of the Purchase and Sale agreement. Legal representation can vary quite a bit depending on exactly what the attorney is asked to do, but as a ball park, you can expect to pay anywhere from $300-$1,500. You can expect to pay closer to $300-$800 on a standard Purchase and Sale review, and closer to $1,500 with more complex transactions (where, ideally, the attorney will be in attendance at the closing for you).
Massachusetts Title V
The Massachusetts Title V is a home sale expense every seller in Massachusetts is required to pay, unless they are serviced by public sewer. It is a state law in Massachusetts to complete a Title V inspection upon the transfer of real estate (unless there is no mortgage on the home). Lenders require a passing Title V or, in the case of failure, some lenders will let you escrow an amount that is set aside to provide a new system. The escrow amount is usually 1.5 times the cost of the new septic system. You can expect to pay around $800 dollars for a Title V inspection and it should include a charge for pumping the system. The cost could increase if the septic tank or distribution box are in an area that is difficult to access. A Title V septic inspection is good for two years and can also be extended a third year if you pump the system annually.
Smoke Detector and Carbon Monoxide Detector Certification
It is required by the state of Massachusetts to have your smoke and carbon monoxide detectors inspected prior to closing. These inspections are done by your local fire department. The charge for inspecting the smoke and carbon monoxide detectors is typically around $25-$100. You should be aware that new regulations have been put in place surrounding Massachusetts smoke detector laws, which could have an impact on the cost of selling your home if you need to install new or more detectors.
Preparing A New Massachusetts Deed
In Massachusetts, it is the seller’s responsibility to have a new deed prepared for the buyer. The deed is recorded at the registry, and the preparation of the deed is typically around $100-$150. Your representing attorney will prepare the deed, unless you do not have legal representation, in which case the lender’s lawyer will prepared the deed.
Miscellaneous Home Sale Expenses
There will be some minor miscellaneous expenses for smaller items that will be added to your HUD settlement statement at the closing. These fees can include overnight mailing, courier services, wiring expenses, processing mortgage discharges and recording fees for the various documents at the Registry of Deeds. The total of these miscellaneous expenses typically amount to a couple hundred dollars.
Seller closing costs in Massachusetts are pretty straightforward when you know what they entail. Use this list to plan ahead and be prepared for your closing!