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You’re getting ready to sell your home, but you know that the price you list and sell your home for is not the same amount you will get at the closing deposited into your account.
Thats because you have to seller closing costs and Connecticut has some very specific costs that you will need to understand.
This is in addition to all the other costs of selling a house that you will also need to be aware of as a home seller.
The fact of the matter is, both the buyer and seller have to pay different closing costs during a property transfer.
But just what closing costs are your responsibility as a seller?
Typical Closing Costs in CT for Sellers
Let’s dig in with a practical example and find out a little more about what closing costs are, which ones you can expect to see as part of your home sale, and which ones you’ll be responsible for paying once your home sells.
Joe and Kathy own a cozy single family ranch in West Hartford, they need to sell in order buy a larger home for their growing family.
After properly getting their house ready to sell, they hire a Realtor and list their house for sale on the Connecticut MLS for $275,000. After a few weeks of being on the market they find a buyer and sell their home for $269,500.
What will Joe and Kathy expect to pay for closing costs?
Take a look at the below table as an example.
| Description | Formula | Fees for Sales Price of $269,500 |
|---|---|---|
| Real Estate Commissions* | 6% | $16,170 |
| Connecticut Conveyance Taxes** | 0.75% | $2,021.25 |
| Municipal/City Transfer Tax*** | 0.25% | $673.75 |
| Real Estate Attorney Fee | $750 - $1,250 | $1,000 |
| Recording Fees | $159-$200 | $200 |
| Total Closing Costs for Seller in CT | $20,065 |
* Save at least 50% of this cost with our flat fee MLS in Connecticut listing plans
** Connecticut state conveyance tax is .0075 (.75%) of the sales price up to $800,00. Any amount above $800,000 is taxed at .0125 (1.25%)
*** Most municipals/cities transfer tax is 0.0025 (.25%), however there are 18 approved cities that can charge a higher rate, typically up to 0.005 (.5%). They are Bloomfield, Bridgeport, Bristol, East Hartford, Groton, Hamden, Hartford, Meriden, Middletown, New Britain, New Haven, New London, Norwalk, Norwich, Southington, Stamford, Waterbury and Windham
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As you can see, selling a house adds up to a lot of money out of your pocket, so be sure to account for it all when running your numbers to see what you will walk away from the closing table with.
Also, real estate deals in Connecticut can also have terms in the contract that state the seller will pay for the buyers closing costs. This will sweeten the deal for the buyer so they don’t have to pay so much out of pocket.
This may seem like a turnoff for sellers but I always advise them not to look at it as the seller paying them but to look at the net purchase price AFTER reducing by the amount of seller paid closing costs as the real purchase price the buyer is willing to pay.
Please note: Part of the closing process if for the real estate attorney to make sure all the closing costs are accounted for and paid to the correct places. This will be accounted for in the attorney fees that you will have to pay.
What Is the Different Closing Costs for Buyers vs Sellers?
Closing costs are, quite simply, the costs associated with the transfer of a home from one party to another. These costs, such as taxes, agent commission, and title transfer fees, are paid at closing when the seller officially transfers ownership to the buyer.
There are a wide variety of closing costs when selling or buying a home in Connecticut and it can be quite confusing to understand them all. Most of the common costs and who typically pays for them are included in the table below.
| Buyer Pays | Seller Pays | Closing Cost Description |
|---|---|---|
| Yes | No | Application fee: This is the fee charged by your lender to process your loan application. This fee can cover different things depending on your lender, but often includes a credit check and sometimes covers the appraisal. Not all lenders require an application fee, so check with your lender. |
| Yes | No | Appraisal: This is paid to the appraisal company for determining the fair market value of the property. |
| Yes | Yes | Attorney fee: An attorney generally is brought in to check over all the closing documents on behalf of the buyer or lender. |
| No | Yes | Conveyance tax: In Connecticut, there is a uniform fee of one-half of one percent of the sale price up to $800,000, and 1 percent of anything over $800,000, that goes to the state. Commercial properties are taxed at 1 percent of the sale price regardless of price. There also are municipal portions of this conveyance tax that vary based on where in Connecticut you live. |
| Yes | No | Courier fee: A courier often is used to transport documents so a loan transaction can be completed quickly. |
| Yes | No | Credit report: The buyer’s credit report is pulled to determine credit history and to determine the likelihood that he’ll be a reliable person to lend money to. This report is crucial in determining whether a buyer will get a loan, how much that loan will be for, and what interest rate will be charged. |
| Yes | No | Document preparation fees: These fees go for preparing necessary documents for the sale, such as the official offer and the final closing papers. |
| Yes | No | Escrow deposit for property taxes & mortgage insurance: Some lenders require buyers to put down two months of property tax and mortgage payments at closing. |
| Yes | No | FHA Up-Front Mortgage Insurance Premium: For buyers who have an FHA loan, they are required to pay 1.75 percent of the base loan amount in UPMIP. This payment can be rolled into the total loan amount rather than an up-front payment. |
| Yes | No | Home inspection fee: The buyer’s lender likely will require a thorough home inspection by a licensed inspector. This inspection tells the lender whether there are expensive or dangerous issues with the home and if it’s worth lending the money needed for the buyer to purchase the home. |
| No | Yes | Home Owners Association transfer fees: If your home is part of an HOA, you will need to provide proof that your dues are current, how much dues are, and supply copies of the HOA’s minutes and financial statements. |
| Yes | No | Homeowners’ insurance: The lender requires the buyer to purchase homeowners’ insurance before closing to cover any damage. Often, the first year’s premiums are due at closing. |
| Yes | No | Lead-based paint inspection: This is an especially important inspection when buying an older home, and covers the cost of determining whether the home poses a lead-based paint risk. |
| Yes | No | Lender’s policy title insurance: This insurance assures the lender that you own the home and that the lender’s mortgage is a valid lien. This insurance also protects the lender in case there’s a problem with the title. |
| Yes | No | Loan discount points: Buyers can elect to pre-pay interest on their loan. Each “point” amounts to 1 percent of the loan amount. |
| Yes | Yes | Notary fees: Many of the documents that are part of the real estate sales process require notarization. If you’re using an attorney in the sales process, this fee may be included in the overall attorney’s fees as lawyers typically have notaries public on staff. |
| No | Yes | Owner’s policy title insurance: This policy protects the seller in case someone challenges your ownership of the home. It usually is optional. |
| Yes | No | Origination fee: This line item covers the lender’s administrative costs. It typically is about 1 percent of the loan amount, but there are some lenders that advertise no origination fees. |
| Yes | No | Pest inspection: Pest problems can be expensive and dangerous, with many leading to dry rot or broken wood. Many lenders, especially for FHA loans, require pest inspections and remediation before an offer can go through. |
| yes | No | Prepaid interest: Many lenders require buyers to prepay any interest that will accrue between closing and the date of the first mortgage payment. |
| Yes | No | Private Mortgage Insurance (PMI): If a buyer puts down less than 20 percent of the purchase price, most lenders require Private Mortgage Insurance. |
| Yes | No | Property tax: Most lenders want any taxes due within 60 days of closing to be paid up front. |
| No | Yes | Real estate agent’s commission: This is the amount the real estate agent receives for selling the home, often 6 to 7 percent of the total sales price. |
| Yes | Yes | Recording fees: These fees vary based on your city or county and cover the cost of recording the deed transfer on public land records. |
| Yes | No | Specialty inspection fees: Some buyers and lenders request specialty inspections for items such as wells, pools, or the presence of radon. |
| Yes | No | Survey fee: This is paid to the survey company for verifying the property lines and items such as shared fences. |
| Yes | No | Title company title search or exam fee: The title company conducts a thorough search of the property’s records, making sure no one else has a claim to the property. |
| No | Yes | Transfer taxes: This is the tax paid when the title is transferred from the seller to the buyer. |
| Yes | No | Underwriting fee: This fee goes to the lender and covers the cost of researching whether or not to approve the buyer’s loan. |
| Yes | No | VA funding fee: Those who receive VA loans may be required to pay this fee, depending on their type of service and amount of loan. It goes to the VA to fund the home loan program and can be rolled into the overall amount of the loan. |
Does Connecticut Have Exceptions to a Seller Having To Pay Closing Costs?
Yes, in some sales situations, some closing costs won’t be paid. The conveyance tax is exempted entirely in transfers between spouses, property transfers under $2,000, certain sales by relocation companies, and transfers to certain non-profit organizations.
Since 2010, deeds in lieu of foreclosure and short sales where the price is less than what was owed on the mortgage and liens have also been exempted from paying the conveyance tax.
Final Thoughts
Although you may have heard the horror stories of people blindsided by high closing costs, often that’s the result of a lack of knowledge and preparation.
Doing your research on what closing costs you can expect to pay as a seller in Connecticut, as well as frequently consulting with professionals if you need the assistance, can help you know what to expect when closing finally does come.
