Table of Contents
When it comes to purchasing a home there’s no shortage of information floating around the web. What to look for, sites to browse, advertisements for homes, types of loans, realtor agents, title companies, mortgage companies, can all be found with just a few mouse clicks.
But what about when it comes to actually selling your Rhode Island home?
Few people realize that process of selling a home can be just as arduous of a task as buying, leaving many DIY sellers entering the process completely unprepared.
Many sellers can expect to pay up to 10% of their selling price in fees, with 3-6% of that attributed to closing costs. Knowing what to expect ahead of time can help ensure you are able to save up for these costs and go into negotiations informed and prepared.
If utilized, your agent, lawyer or broker can also help you navigate the selling price, but going in with a firm foundation of knowledge will help ease the process for you both.
Before We Get Started, What is a Closing Anyway?
If this is your first time selling a house in Rhode Island, you likely have little idea of what a closing actually is, what it entails, and why it’s important. In short, a closing refers to the final transactions involved with selling your home (or property), ending with the transfer of the deed to the new owner.
Once you accept an offer on your home or property, a closing date will generally be set for several weeks from that point. During the weeks leading up to closing, the buyer will complete a set of tasks— including having your home inspected— while you prepare to handle closing costs and negotiate with the buyer on the particulars of your deal.
If you choose to sell your home through a real estate agent or broker, then your first appointment with them will be called a ‘listing appointment.’ It’s the first of many steps. At this appointment, you will discuss your home, the cost you would like, the cost you are likely to be able to sell, the process of selling, and closing costs.
Alternatively, you could choose to sell your Rhode Island house quickly to an all cash buyer, typically an investor.
Closing costs refer to a set of fees and taxes due at the time of closing. Some of these costs are covered by the buyer, but the majority fall to the seller. In some cases, the seller offers to cover allclosing costs as part of negotiations.
Seller Closing Costs: What Rhode Island Sellers Can Expect
When it comes to seller’s closing costs, nothing is written in stone. Much of what is “expected” from either the seller’s or buyer’s side is based on local customs, precedence, area and your situation. However, closing is one aspect of your home sale where you can sharpen your negotiation skills and either offer to cover more in order to entice the prospective buyer or negotiate for fewer fees (in the case of a “sellers’ market”).
In Rhode Island, there are five major closing costs typically paid by the seller:
- Closing attorney’s fee, usually between $800 and $1100
- Courier fee, can range from $25-$100
- Deed transfer tax, $2.50 for every $500 of the selling price
- Escrow and closing fee, varies
- Estoppel letter, varies
- Payoff all mortgages, liens, etc., varies
- Property Taxes, varies
- Real Estate Broker’s Commission, typically 5-6% of selling price
- Utilities, varies
- Smoke Detector Certificate, $30
Below we’ve detailed these closing costs associated with selling your Rhode Island home.
Closing attorney’s fee
An attorney will be necessary for discharging the title and mortgage. Your title company may choose to hire the attorney; otherwise, this falls to the seller. Some areas require you to hire a closing attorney to represent you throughout the selling process, and they often charge per hour. Your agent or broker will be able to tell you if this is the case in your area.
If you choose to sell without the assistance of a broker or agent, then you should hire an attorney to help with any paperwork and ensure you aren’t being taken advantage of.
Courier Fee
This fee is optional. You can use a courier to deliver loan payoffs to lender’s while preparing to sell your home. Fees can range from $25-$100 based on how many deliveries are made and what company you use.
Deed transfer tax
Deed transfer taxes vary by municipality. Some areas charge a flat fee, others charge fees like $10 per $1,000 of the selling price. Rhode Island’s standard transfer tax is $2.50 for every $500 of the selling price. You can ask your broker or agent how your municipality handles this tax, or you can research it before contacting an agent to sell. This tax lives under different monikers such as a State Stamp Tax, Mortgage tax, documentary transfer tax, stamp tax, etc.
Escrow and closing fee
Title companies sometimes charge a fee in the escrow process; they hold the buyer’s money and your signed deed until you and your buyer have completed all steps in the closing transaction. The exact amount of the fee varies based on the title company, but the seller is traditionally responsible for paying.
Estoppel letter
This fee only applies if your home or condo is part of a homeowners’ association. An estoppel letter is an HOA’s official accounting of any outstanding dues you may have.
Payoff all mortgages, liens, etc.
If you owe any money on your home, it must be paid off before you can sell. Otherwise, any remaining amount will be deducted from your selling price. Some mortgage companies charge a fee for early payoff, and others charge a recording service fee. Check with your provider for additional costs. Keep in mind, this fee will vary if you are selling via Short Sale.
Property Taxes
As the seller, you are responsible for paying any outstanding property tax, and you may be required to pay a prorated amount calculated up to the day of closing.
Real Estate Broker’s Commission
Commissions paid to your broker or agent also cover commission for the buyer’s broker or agent. These typically range from 5-6% of the home’s purchase price. Or if you want to save on real estate broker commissions, you should consider using a flat-fee MLS listing!
Do You Want To Sell a Home in Rhode Island?
If you want to save at least 50% of the Realtor commissions, check out our Flat Fee MLS Listings in Rhode Island…
Utilities
You will need to pay any outstanding utility bills, and you may have to pay a prorated amount up to the date of sale to cover current use. Once you report the close of your sale to your utility companies, they will calculate the amount owed for that month.
Smoke Detector Certificate
RI General Law 44-30-71.3 requires sellers to have smoke detectors in the home and to present a smoke detector certificate no later than closing. This certificate generally costs $30.
Costs Can Vary by Buyer Loan Type
When selling your house there are closing costs for the buyer too. Typically the buyer is responsible for these costs but they can ask the seller to contribute to the cost of closing costs. The person buying your property typically has three potential home loans or mortgages: VA, FHA, or CONV. Depending on which types of loan they take, who pays which fee can get a little mixed up. On top of that, you can negotiate certain fees with the buyer. Let’s break down a little bit about these loans and how the closing costs vary.
VA Loans
A VA loan is available to veterans with any discharge other than dishonorable. The loans become available after a minimum of 90 days service during wartime or 181 continues days in peacetime. This loan can cover up to 25% of costs and eliminates the need for a down payment. However, veterans must either apply for a mortgage in addition to the loan or cover the rest of the purchase price on their own.
Variable Closing Costs: VA
- Tax Certificate: Buyer
- Closing Fee – Real Estate: Buyer
- Tax Service Fee: Seller
- Final Inspection: Buyer
- Document Preparation Fee for Lender: Buyer
- Underwriter Fee for Lender: Buyer
- Courier Fee: Buyer
FHA Loans
This mortgage option is government-backed, insured by the Federal Housing Administration (FHA). FHA loans are the most popular with first-time home buyers, as they require lower credit scores and smaller down payments than conventional loans. Buyers must meet a long list of qualifications to use this loan.
Variable Closing Costs: FHA
- Tax Certificate: Buyer
- Closing Fee – Real Estate: 50/50
- Tax Service Fee: Seller
- Final Inspection: Buyer
- Document Preparation Fee for Lender: Buyer
- Underwriter Fee for Lender: Buyer
- Courier Fee: Buyer
Conventional Loans
Conventional loans are not backed by any government agency. They often have fixed terms and rates. Conventional loans include Conforming loans, Non-conforming loans, Jumbo loans, Portfolio loans, and Sub-prime loans. When using Conventional Loans, buyers typically need a higher credit score and down payment than with an FHA.
Variable Closing Costs: Conventional
- Tax Certificate: Buyer
- Closing Fee – Real Estate: 50/50
- Tax Service Fee: Buyer
- Final Inspection: Buyer
- Document Preparation Fee for Lender: Buyer
- Underwriter Fee for Lender: Buyer
- Courier Fee: Buyer
Understanding what type of loan your buyer has (or if they even have one) is an essential step in calculating potential closing costs. If you use a real estate agent or broker, they can help you estimate the differences and know what will be expected.
Some other buyer fees include.
Title Insurance Fee
Sellers must provide Title Insurance, which proves that the home really is yours to sell. This protects the buyer’s investment in case someone else tries to claim that the home is theirs. You will pay the new owner’s title insurance premium. The number will vary based on title company and where you live.
Deed and recording fees
When you transfer the deed or title of your home, the county records and formalizes the transfer. Both services come with a fee that varies by county but often ranges from $100-$250+.
Transaction/Brokerage Fee
This fee only applies if your agent is not a broker and works through a broker’s office. They may charge a fee for processing the transaction and maintaining records for seven years. The fee varies by office, but your agent must disclose the fee upfront. This fee is often negotiable.
What Other Costs Can I Expect Selling My Home?
Closing Costs aren’t the only expenditure when it comes to selling. You will need to make sure your house is in tip-top shape, so consider hiring some help or setting aside time to fix up your space. During the selling process, you may need to pay for repairs and upgrades after inspection or decide to entice your buyer by offering to cover additional fees.
Cleaning and Shaping Up
First impressions are important with home sales. A messy house, chipped paint, or stained walls and floors may be part of your memories, but they are instant turn-offs to potential buyers. Spiderwebs, dust, animal hair, and smelly houses need to be cleaned up before you open your home for tours and open houses.
Some buyers may have allergies that your family never had to account for. Dust, mildew, pet hair and dander, and more can affect their appreciation of your home.
To be as presentable as you can, consider hiring a lawn service to clean up your yard or set aside a weekend to do so yourself. If you have any rooms with colored or dark walls, consider painting over with a neutral color such as white or eggshell. Lighter colors help the space seem more open and friendlier, and the walls can act as a ‘blank canvas’ for buyers to imagine what they might do with the space.
Moving and Storage
If you are downsizing or have yet to find a new permanent residence, you may need to store some of your belongings. Storage facilities often charge a monthly rate, and you gain access to a personal, locked storage shed. You can rent these in a variety of sizes, so keep a detailed list of what you are storing and what you want to keep out.
If you are in the process of buying moving boxes, you need to consider all of your moving and purchasing or renting costs when budgeting to sell your home. You may need to cover some of the costs with your new mortgage, so be upfront with your lender in calculations.
If you file your change of address with the United States Postal Service online, you will accrue a fee of one dollar.
Repairs and Upgrades
House inspections are standard when buying a house; the buyer will pay the inspector. However, if the inspector finds anything in the house not up to code or in disrepair, they will report this to the buyer. It falls to you as the seller to make the repairs unless you are able to negotiate otherwise with the buyer.
Enticing the Buyer
Negotiating with potential buyers is a major part of selling your house. You can negotiate closing costs, repairs, appliances, purchase price, and more. Your agent or broker typically handles communicating with the buyer and their agent or broker, but the negotiation decisions come from you and the buyer. A common step for enticing a buyer is to cover their closing fees in addition to your own, rather than offering a lower purchase price.
How Do I Calculate Rhode Island Closing Costs?
You may have noticed that several of the listed fees vary. Your selling price, county and local laws, agent fees, attorney rates, and more will affect the total amount of your closing costs. Some fees even depend on the type of loan your buyer brings to the table! You will want to bring up closing costs with your agent early in the process; they can ballpark an amount so that you have a safe estimation. You can also find several closing cost calculators online to help.
If you choose to sell your house without representation, then you want to be upfront with all lenders and do some investigations with your municipality and utilities before listing your home.
Final Thoughts
Selling your house is a long and complicated project, especially if you are in the process of or just finished moving. The more you know going in, the easier a time you will have. You want to be sure you have a thorough understanding of your own budget before moving forward. Agents and brokers can help you navigate the process and ensure that your best interests are considered in all negotiations. This can help ease a lot of the burden on you the seller.
Something to remember is that real estate agents and brokers cannot give you legal advice. If you have any legal issues, they are best discussed with an attorney.
