Everything You Need to Know About Closing Costs in Minnesota
When you’re selling a home, you’ve got plenty of important details on your mind. One aspect of the process that can be difficult to understand for many home sellers is the expenses associated with closing costs. Unfortunately, those costs can add up quickly, and if you’re not planning for them, they can amount to an unexpected surprise.
In this post from our cash home buyer team at Bill Buys Houses, we’re breaking down everything you need to know about closing costs in Minnesota. Contact Bill to find out more about selling your house fast for cash today!
What Are Closing Costs?
The closing process is the final phase when selling a home. During closing, buyers and sellers will typically sit down together with a third-party representative who will oversee the signing of documentation and make sure the process goes smoothly. Most people associate closing with the closing table, where all of the paperwork gets finalized and the transfer of ownership is completed.
During most home sales, both a buyer and seller will be required to pay closing costs that cover the expense of services and documentation associated with closing. For sellers, this typically ends up being between 1 and 3 percent of a home’s selling price and mainly pays for expenses associated with the transfer of ownership.
For buyers, the costs are a bit higher at between 3 to 4 percent and generally cover lender fees. Additionally, sellers will also need to pay any commission fees. In Minnesota, those average out to about 6 percent.
Calculating Your Closing Costs
Although you can’t know precisely what your closing costs as a seller will be until you begin the process, you can use a simple formula to anticipate what they may come to. To plan for any anticipated closing costs as a seller, you can use a simple formula. Find out what your closing costs will be and then simply multiply that percentage by the overall selling price of the home. For example, if your anticipated closing costs are 3%, you will multiply the selling price of the home by .03.
To get a better idea of how much the average closing costs might be in Minnesota, let’s take a look at Minnesota’s typical home sale price. According to Zillow, Minnesota home values have increased more than 9% during the past year, with a typical home value of around $292,000.
Using this average price as a guideline, we might expect to see seller’s closing costs of between $2920 and $8760. On top of this, if we’re paying a 6% commission rate to an agent, we’ll need to add on around $17,520. Altogether, your commission costs and closing costs will come out to a grand total of $26,280 for an average Minnesota home.
What is Included in Closing Costs?
These are rough examples of some of the fees you’ll typically see included in a seller’s closing costs on the average Minnesota home:
● Home Inspection: $385
You’ll need to pay for a home inspection for the buyer and the buyer’s lender. During this inspection, an inspector will thoroughly examine the condition of your home to identify any problems. Expect the inspector to look at a home’s insulation, HVAC system, structural condition, plumbing, drainage, foundation, roof, walls, doors, windows, wiring, and more.
● Title Insurance: $1000
Imagine buying a home and then learning that the seller did not have the legal authority to sell it. Title insurance protects the buyer against this and other potential problems related to the title of a property.
● Title Search: $300
The buyer’s lender will request a title search to make sure you’re the rightful owner of a property and there are no existing legal issues with a home such as mechanical or construction liens.
● Property Survey: $500
A property survey is needed to determine and verify the legal description of the property a home sits on. This can include details such as boundary lines, easements, building locations, hazard areas, and elevation.
● Appraisal: $400
During the appraisal, an appraiser will determine the property’s fair market value based on a number of factors.
These can include but are not limited to:
◦the home’s structural integrity
◦any improvements or upgrades
◦the home’s overall condition
◦total property area
◦chimney, roof, and gutter condition
◦driveway space and condition
◦number of bedrooms and bathrooms
◦square footage and amount of livable space
◦condition of HVAC system
◦existence of lead paint or asbestos
◦electricity and plumbing
◦general home upkeep
◦evidence of pests or pest damage
● Mortgage Payoff: May Vary
If you still owe a balance on your mortgage, you’ll owe this at closing. Keep in mind that some lenders charge a penalty for paying off a loan ahead of term. Loan payoff costs will also be included. These include the buyer’s loan origination fees, prepaid interest, and application fees and typically average out to between 0.5% to 1.5% of the total sales price.
● Additional Costs
In addition to the above costs, you may also be expected to cover recording fees, attorney fees, property taxes, HOA fees, and utilities during closing.
Sell a Minnesota Home Fast Without the Hassle
If all of those numbers are a bit overwhelming and you’re ready to sell your house fast for cash, our cash buyers at Bill Buys Houses can help. Connect with Bill online or call 651-270-9191 to set aside concerns about making repairs for appraisals and sell your home fast!