If you’re preparing to sell your home in Denver, you’re probably wondering: “Who pays closing costs when selling a home?” It’s a common question for many sellers, and for good reason—closing costs are one of the final financial hurdles before successfully completing a home sale. Understanding who is responsible for these costs and what they entail can help you prepare for a smoother transaction and avoid surprises at the closing table.
In this post, the Linkow Baltimore Team, led by Aaron Linkow, will break down the ins and outs of closing costs for sellers in Denver. We’ll explain what closing costs are, who typically pays for what, and how the Denver real estate market might affect these expenses. By the end of this post, you’ll have a clearer understanding of how to navigate the closing process.
What Are Closing Costs?
Before we dive into who pays for closing costs, let’s clarify what closing costs actually are. Closing costs refer to the various fees and expenses that are paid at the end of a real estate transaction, when the title of the property is transferred from the seller to the buyer. These costs cover a range of services, including loan processing, title insurance, appraisals, and other administrative expenses necessary to complete the sale.
Closing costs typically range between **2% and 5% of the sale price** of the home, depending on the specifics of the deal and the market. For a home selling in Denver, where the median home price is around $600,000, closing costs could range from $12,000 to $30,000 in total, split between the buyer and the seller.
Who Pays Closing Costs in Denver?
In Denver, and most parts of the U.S., both buyers and sellers are responsible for certain closing costs. However, the specific costs each party pays can vary based on local customs, the terms of the purchase contract, and negotiations between the buyer and seller.
Closing Costs Typically Paid by the Seller
As a seller in Denver, you’ll generally be responsible for covering several key closing costs. These include:
-Real Estate Agent Commissions: The largest expense for most sellers is the real estate agent commission. In Denver, this typically amounts to **5% to 6%** of the home’s sale price, split between the buyer’s and seller’s agents. This is the fee you pay for the professional services provided by your real estate agents, including marketing, negotiating, and handling the transaction. This fee is fully negotiable.
-Title Insurance (Owner’s Policy): The seller usually pays for the owner’s title insurance policy, which protects the buyer against any claims or liens on the property. This ensures that the buyer receives clear ownership of the home. Title insurance in Denver can cost anywhere from $1,000 on up, depending on the home’s value.
-Transfer Taxes: Transfer taxes are imposed by the state or local government to cover the cost of transferring the property title from the seller to the buyer. In Denver, the state transfer tax is relatively low compared to other states, but it’s still something sellers need to budget for. The average transfer tax in Colorado is **0.01%** of the sale price and is neighborhood specific.
-Prorated Property Taxes: As a seller, you’ll be responsible for paying property taxes up until the day the sale closes. This is prorated, meaning you only pay for the portion of the year during which you owned the home. If you’ve already paid the full year’s property taxes, the buyer will reimburse you for the time they’ll own the property.
-Settlement Fees: Settlement or escrow fees cover the cost of the title company or escrow agent who oversees the transaction and ensures all documents are correctly signed and funds properly disbursed. These fees are typically shared between the buyer and seller, but in some cases, the seller may cover the majority of these fees.
-Attorney Fees (if applicable): While not required in Colorado, some sellers choose to hire a real estate attorney to review the contract and ensure all legal aspects of the sale are properly handled. Attorney fees vary but can add a few hundred dollars to your closing costs.
Closing Costs Typically Paid by the Buyer
Buyers, on the other hand, are usually responsible for the following closing costs:
-Loan Origination Fees: These are the fees charged by the buyer’s mortgage lender to process and approve their loan. This includes everything from underwriting to administrative fees, and it can amount to **1% to 2%** of the loan amount.
-Appraisal Fee: Buyers typically pay for the home appraisal, which is required by lenders to ensure the property is worth the amount being borrowed. Appraisal fees in Denver can range from $500 to $700.
-Inspection Fees: Buyers are responsible for paying for any home inspections they request, such as general home inspections, pest inspections, or radon testing. These inspections help buyers determine if there are any issues with the home before closing.
-Title Insurance (Lender’s Policy): The buyer’s lender will require a separate title insurance policy to protect their interest in the property. This is usually paid by the buyer.
-Prepaid Expenses: Buyers often need to prepay certain expenses at closing, including homeowners insurance premiums and property taxes, which are held in an escrow account for future payments.
Negotiating Closing Costs
While the above breakdown reflects the typical distribution of closing costs in Denver, closing costs are often negotiable. During the negotiation process, a buyer might request that the seller cover additional costs, such as a portion of the buyer’s closing fees or buyer agent's commission, to make the deal more attractive. This is known as a seller concession.
What Are Seller Concessions?
Seller concessions are closing costs that the seller agrees to pay on behalf of the buyer to help reduce the buyer’s out-of-pocket expenses. These concessions can be negotiated into the purchase agreement as a way to incentivize the buyer or facilitate a faster closing.
For example, in a buyer’s market where there is less competition among buyers, sellers might offer to pay a portion of the buyer’s closing costs to make their home more appealing. On the other hand, in a seller’s market like Denver, where homes often receive multiple offers, sellers may have less incentive to agree to concessions.
Common examples of seller concessions include:
- Covering the buyer’s loan origination fees
- Paying for repairs or offering a repair credit
- Covering a portion of the buyer’s inspection or appraisal costs
How the Denver Real Estate Market Affects Closing Costs
Denver’s real estate market can play a significant role in how closing costs are allocated between buyers and sellers. In a strong seller’s market, where homes are in high demand, sellers may be less willing to offer concessions or cover extra costs for the buyer. In contrast, during a slower market, sellers may need to be more flexible to attract buyers and get their home sold quickly.
It’s essential to work with an experienced Denver Realtor like Aaron Linkow from the Linkow Baltimore Team, who can help you understand the current market conditions and negotiate the best terms for your sale.
How to Estimate Your Closing Costs in Denver
Estimating your closing costs can help you budget and plan for your home sale. Here’s a rough breakdown of typical seller closing costs in Denver:
-Real Estate Agent Commissions: 5% to 6% of the sale price
-Title Insurance (Owner’s Policy): $1,000 to $2,000
-Transfer Taxes: 0.01% of the sale price (If applicable)
-Prorated Property Taxes: Varies based on your property’s assessed value
-Settlement Fees: $500 to $1,500 (shared between buyer and seller)
To get a more accurate estimate of your closing costs, it’s best to work with your real estate agent and title company. They can provide you with a detailed estimate known as a Sellers Net Sheet before the sale is finalized.
Let the Linkow Baltimore Team Help You Navigate Closing Costs
Selling a home in Denver involves many steps, and understanding who pays closing costs is just one piece of the puzzle. Whether you’re looking to sell quickly or maximize your profits, the Linkow Baltimore Team, led by Aaron Linkow, is here to guide you through every aspect of the selling process. From negotiating favorable terms to managing closing costs, we’ll ensure your home sale goes smoothly.
Contact Aaron Linkow and the Linkow Baltimore Team today to schedule a consultation and learn more about how we can help you sell your home in Denver with confidence.
