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How Much Are Seller Closing Costs in California?

Figuring out the closing costs associated with your property is important process for a seller in California and nationwide.

If you live in the Golden State and are thinking about selling your home either now or sometime in the near future, then one of the first questions you might ask yourself is “How much are seller closing costs in California?”

Selling your home is probably one of the biggest financial transactions you’ll ever make. It’s important you understand the costs involved and also how they will impact your bottom line. We’re going to break these down in detail. First, this article will go through the closing costs for a seller in California. Then, it will also show you tools and resources that will help you get a rough estimate on your net proceeds and if you’re in Silicon Valley, potentially save you thousands of dollars.

Understanding What Seller Closing Costs in California Are

First, it is important to understand what exactly closing costs for a seller in California consist of when you are about to sell your property. There are four major groups these closing costs can be categorized under. These include:

  • Real estate commissions
  • Escrow and title fees
  • Transfer taxes
  • Miscellaneous items

Some of these costs can vary depending on what county and city you live in. Depending on the value of your home and the final selling price, your closing costs can come out to a large amount.

City transfer tax in California

Many Realtor’s ® avoid talking about a seller’s closing costs because it can be an uncomfortable conversation for them. This is often because they have a hard time justifying their commissions. Understanding what your closing costs will be and how much these are going to cost you when selling your home will help you be better prepared in knowing who and what you’re paying for, as well as why. The next section will break this down further.

What Is The Real Estate Commission In California?

The average real estate commission in California is 5-6%. But you don’t necessarily have to pay this amount. Contrary to what some real estate agents will tell you, real estate commissions in California are negotiable. In fact, it says this on the first page of the listing agreement you’ll sign with your agent.

 

real estate commissions are negotiable in listing agreement

 

When you go to sell your home, you will pay your listing agent’s commission. You will also pay the buyer’s agent’s commission. The usual 5 or 6% is normally split 50/50. When you commit to your Realtor ®, you will sign a listing contract with them. This contract is usually an exclusive agreement between you and the agent’s broker. (The broker refers to the company that the agent works for).

The California Listing Agreement When Selling Your Home

When you sign the listing agreement, there are a few important things that you’ll want to look out for. One of these things is the total commission. It’s important to understand how much is going to your agent’s brokerage, as well as how much is going to the buyer’s brokerage. Some listing agents will avoid talking about this when discussing the closing costs for a seller. This could be because they may try and keep more of the commission for themselves.

An example of this might be an agent who is charging you a 6% commission, but really paying the buyer’s agent 2.5% and keeping 3.5% to themselves. This is something you should look out for and discuss with your agent upfront. The listing agreement you sign with your Realtor ® specifies not only the total commission percentage but also how much your listing brokerage will be paying to the buyer’s agent.

Below is an example of our listing agreement. The 3.5% is the total commission that the seller pays. Of this, 2.5% is paid to the buyer’s agent (if the buyer is represented by another brokerage). If the buyer is represented by SoldNest, then the total commission drops to 2%.

 

California real estate listing agreement

 

This is where your agent can add in any additional terms to the agreement.

 

real estate commissions in california

 

Since we’re talking about the listing agreement, I’ll mention one more thing you’ll want to watch out for. This is an exclusive agreement between you and the brokerage your agent works for. This means that you cannot work with another agent to sell your home for the time period that the agreement is good for.

Many agents will tell you that the listing period has to be six months – it doesn’t. Similar to the commissions, this is also negotiable. Other brokerages will tell their agents to always say or use six months because this will ensure they still get paid even if your home takes longer to sell. You should only agree to a time period that you’re comfortable with. These dates are filled in on the top of page one.

 

real estate listing agreement dates

 

Saving On Real Estate Commissions in California

How can you save on real estate commissions when selling your home? There is one critical first step. Ask. Real estate commissions are negotiable. Any agent who tells you otherwise, or paints the picture that commissions are non-negotiable, is flat out lying. Most agents avoid talking about commissions because they can’t justify how much they’re getting paid. Instead, they’ll talk to you about how great their company is that they work for (which has no impact on the sale of your home). They may also talk about who they are, and how long they’ve been in the business. While this may be interesting background information, it doesn’t necessarily correspond to how well they will be able to sell your property.

Interviewing a real estate agent is just the first step of the home selling process. Finding out how much you are going to pay in commission should be one of a few important questions you can ask upfront. Your goal should be to try and get the best service and the best marketing at the lowest commission. Along with this, you want to be partnering with someone you feel comfortable with.

There are some agents who will charge you less in commission. But most of the time, you’re not getting the service and the marketing that you should. Most of these discount real estate agents only do the bare minimum. This includes putting your home on the MLS, having an open house, and having flyers made. It’s not to say that real estate agents shouldn’t do these things. They should do these things and more.

Time For A Change

Many homeowners think the seller closing costs in California are too high and due for a change. We agree. This is one of the reasons why SoldNest was founded. We’re a full-service brokerage with lower commissions.

Below is an image showing how much a seller would pay for the “standard” real estate commissions in California on a $1,500,000 home compared to what they would pay with SoldNest.

 

Silicon Valley Real Estate Commissions

 

Commissions are a fundamental part of seller closing costs in California. When selling your home and discussing commissions with your potential Realtor ®, the most important thing that you should do is ask how much they charge. If they respond with a total commission of either 5 or 6%, then ask if they will do it for less. After all, the worst thing they can say is ‘no’. Some might respond and tell you that their broker doesn’t allow them to. Most of the time though, this is false.

Don’t Compromise On Quality When Selling Your Home

It’s also important to remember in these conversations to ensure you are not getting a lower quality of service. You should be getting a full-service listing agent who will do more than just put your house on the MLS, hold an open house, and have some flyers made. Your agent should know how to structure a specific marketing plan for your home to maximize interest and create the highest possible demand. Doing so can get more buyers interested in your home and help drive the potential selling price higher.  Targeted digital advertising is better today than ever before. There is no reason not to have a customized and tactical marketing plan for the sale of your property. And it shouldn’t cost you extra to do so.

Your agent should know how to structure a specific marketing plan for your home to maximize interest and create the highest possible demand. Doing so can get more buyers interested in your home and help drive the potential selling price higher.  Targeted digital advertising is better today than ever before. There is no reason not to have a customized and tactical marketing plan for the sale of your property. And it shouldn’t cost you extra to do so.

Paying less than the average California real estate commission rate can help save you tens of thousands of dollars. All that you have to do is ask.

SoldNest 1% Listing Fee

Escrow Fees In California

One of the first things your listing agent will do after you sign the listing agreement with them will be to open escrow. It’s customary in California for the seller to choose which escrow company they’d like to use. If you have one that you want to use, you can mention the name and contact info to your listing agent. Alternatively, your agent can do it for you. Working with an escrow company isn’t necessarily the first thing that comes to mind when you think about putting your property on the market. But it is an important part of the final stages of selling a home, and the overall seller closing costs in California.

Alternatively, your agent can do it for you. Working with an escrow company isn’t necessarily the first thing that comes to mind when you think about putting your property on the market. But it is an important part of the final stages of selling a home, and the overall seller closing costs in California.

Working With An Escrow Company

You might ask “Why does there need to be an escrow company?” “Escrow” is a neutral third party that handles the transfer of the deposits, documents, funds, and other things in a real estate transaction. The funds are held in a trust with your escrow officer (escrow agent) until a specific condition or event takes place according to the contract signed by the seller and the buyer. In other words, the escrow company is the party that crosses all the T’s and dots all the I’s in order to protect both the buyer and seller. An escrow officer acts as a neutral third party throughout the entire closing process.  It is important to ensure that the buyer and the seller are both protected as money and property change hands.

For providing their services, the escrow company charges a fee. These are usually referred to as “escrow fees” on your settlement statement. A settlement statement shows the disbursement of your costs as well as your net proceeds. You will see this when you sign the final documents. Exactly who pays the escrow fees in California will depend on which county your property is in.

A rough calculation of the cost is $2.00 for every $1,000 of the sales price, plus $250. So if your home sells for $1,000,000, and you live in a county that requires the seller to pay, you’ll pay an escrow fee of roughly $2,250. Most escrow companies charge around the same amount.

Title Insurance

Another fee that you’ll see on your settlement statement is title insurance. Sometimes title insurance is bundled alongside escrow fees. Title insurance is an insurance policy that protects a party from a financial loss due to defects on the title. There are different policies that cover different things. Typically, a title insurance policy usually protects the party from things such as someone claiming ownership of the property. It can also protect against liens that might pop up during or after the transaction closes. Sometimes in the process of selling a property, it can turn out that more people have a right to ownership than previously thought. Title insurance works to protect against this. For the buyer, title insurance protects against things like potential unpaid debts that the seller may have had, ensuring that they don’t have to take these on.

Typically, a title insurance policy usually protects the party from things such as someone claiming ownership of the property. It can also protect against liens that might pop up during or after the transaction closes. Sometimes in the process of selling a property, it can turn out that more people have a right to ownership than previously thought. Title insurance works to protect against this. For the buyer, title insurance protects against things like potential unpaid debts that the seller may have had, ensuring that they don’t have to take these on.

Title vs. Escrow

A title insurance policy is issued by a title company. Sometimes, escrow companies are under the same umbrella as the title company. Title companies are usually big corporations and many of them are publicly traded. Escrow companies take a lot less capital to start and can be their own separate entity. In Northern California, the escrow company will usually handle the title services. In Southern California, they are usually two separate companies during the transaction.

Similar to how the cost of escrow fees are determined, who pays the title insurance in California depends on the county your property is in. Sometimes the buyer pays for it, sometimes the seller pays for it. In other cases, it can be split 50/50.

Whether the seller pays for it or not, the policy covers the buyer. If the buyer is getting financing, they must also purchase a similar policy that protects their lender.

Not sure what these fees will mean for you? You can use a California escrow fee calculator from Old Republic Title company to get an estimate on what you might be charged based on your sales price.

You can also see a separate breakdown of who pays escrow fees in California

California Transfer Tax

Part of the closing costs for a seller in California is city and county transfer taxes. These are two separate tax payments made to the county and city where the property is located. Every time a property changes ownership, the local governments want a piece of the pie.

Every county in California has a transfer tax except for San Francisco County. The cost of county transfer tax in California is $1.10 for every $1,000 of the sales price. So if your house sells for $1,000,000 and your property is not located in San Francisco County, then the county transfer tax would be $1,100. This tax is another one to be considered in closing costs for a seller in California.

Not all cities in California have a transfer tax. Only some of them do, and the city transfer tax is either paid for by the buyer, the seller, split 50/50 between the two, or is negotiable. Your listing agent should be able to break these costs down for you upfront when meeting with you about selling your property.

The cost for the city transfer taxes varies from place to place. In Santa Clara County, areas San Jose, Palo Alto, and Mountain View all have city transfer taxes. The San Jose areas also include Almaden Valley, Willow Glen, Evergreen, and Silver Creek. The cost is $3.30 for every $1,000 of the sales price. On a million dollar sales price, this comes out to $3,300. For these three cities, the cost is split 50/50 between the buyer and seller. Cities in Santa Clara County that do not have a city transfer tax include Saratoga, Los Gatos, Cupertino, and Sunnyvale.

Real estate city transfer tax in San Francisco operates under its own unique calculation. If your property is in San Francisco County, the chart below will give you an idea as to roughly how much your city tax will be based on your sales price.

City transfer tax in California when selling a home

Miscellaneous Fees As Part Of Seller Closing Costs In California

When you see the final breakdown of your closing costs when signing the final paperwork for your real estate transaction, you’ll notice there are several miscellaneous items. These aren’t anywhere near the cost of the other charges as part of a seller’s closing costs. Even though they take a smaller hit overall on your finances, it is still nice to know what these may include.

Some of the miscellaneous fees might include a notary fee, a recording fee, and HOA fees (if you have an HOA). If you’re paying for any inspections and don’t want to pay them upfront, you can also include these under miscellaneous costs. Adding them as part of your closing costs can help you get a better picture as to how much you’re actually netting from the sale of your property.

Seller Closing Costs In California

In summary, when you sell a home in California, you will have closing costs that you will need to pay. It’s always best to understand what these costs are, and especially how much they are. The answers could help make a decision for your next step in life a bit easier.

If there’s one thing that to take away from this, it’s that real estate commission in California is negotiable. In my several years of experience in the industry, I can’t tell you how many homeowners I’ve talked to who thought that 6% was the standard real estate commission. The Commission is the highest dollar amount of a seller’s closing costs. As a real estate broker, I personally feel that this is way too high and is one of the reasons why I founded SoldNest.

It is the case that real estate search websites such as Zillow and Realtor.com are becoming the initial go-to sites for most buyers in their home search. What this means is that a real estate agent’s job of “marketing” a home has become a lot easier over the last 5 to 10 years.

The point is, you shouldn’t have to pay more than necessary without sacrificing top service.

An Important Resource For Sellers In California

There is a lot of work that goes into selling a property. Sometimes, it can be daunting when you are unsure of what it may mean for you financially. But the good news is that there are tools and resources available to you when selling your home.

Want to get an idea of much you might be paying for in terms of seller closing costs in California? Check out our free California seller closing costs calculator. You’ll be able to get a sense of how much your closing costs as a seller might be. This will allow you to begin preparing for the process of selling your home.

Understanding all of the fees involved in the final stages of your home sale before you even begin is one of many tips for selling your home. It is valuable to understand the ins and outs of every step of the way from the very beginning of selling your home to the end. This includes understanding seller closing costs in California.

If you’re thinking of selling your Silicon Valley home sometime soon and would like to work with a top agent who will provide better service at only a total of 2-3.5% real estate commission, then you can see more about SoldNest here. We’ll provide you with a thorough market analysis of your home without any obligation.

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How Much Are Sellers Closing Costs in California?
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How Much Are Sellers Closing Costs in California?
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Closing costs are made up of four categories: real estate commissions, escrow and title fees, transfer taxes, and miscellaneous items. You should know what these are before selling. We dive in and discuss the details of what a sellers closing costs in California will consist of.
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