Closing Costs in Iowa: A Guide for Sellers

Reconveyance fee

After you’ve completed the home sale and settled your mortgage, you’ll typically need to cover a reconveyance fee. This fee is associated with issuing a reconveyance deed, which formally releases you from the mortgage debt.

The mortgage company is responsible for recording this deed, and the exact fee will vary based on the specific city, state, or county where your property is located. This step is essential to ensure that your mortgage is fully cleared and that the property title is officially transferred without any remaining encumbrances.

Realty transfer tax

You also might be responsible for what’s known as a realty transfer tax. These are fees assessed by local governments whenever a property changes ownership.

These taxes are sometimes called a “Deed Excise tax” or a “Documentary Stamp tax.” Who ultimately pays these taxes depends on the state, city, or county where the sale occurs.

In Iowa, for example, the seller is typically responsible for covering transfer taxes as part of the closing costs.

Real estate agent commission

Unless you’re selling your home for sale-by-owner, you’ll likely have used a local agent. Research indicates that an agent’s expertise can significantly impact your sale: In 2023, homes sold with an agent’s assistance had a median price of $405,000, compared to $310,000 for FSBO sellers.

Working with a real estate agent means paying a commission. This fee covers various services, such as accurately pricing your home, marketing it effectively, and negotiating with buyers to ensure you receive the best possible price and terms.

It should be noted, however, that on March 15, 2024, the National Association of Realtors (NAR) announced a landmark lawsuit settlement that will change the way real estate agent commissions are handled in the future. These changes will “decouple” seller and buyer agent compensation. Industry experts predict that this decoupling will likely lower agent fees and give buyers the ability to negotiate commission amounts directly. Learn more.

HomeLight’s transaction data reveals that the national average real estate agent commission is 5.8% of the property sales price. This commission typically includes fees for both the listing and buyer’s agents, with sellers customarily covering the cost.

Use HomeLight’s commission calculator by entering your city for commission data tailored to your specific area.

Attorney Fees

Some states require an attorney to be present when closing the sale of a property.

Real estate attorneys are not essential for closing in Iowa, but your real estate agent may advise working with one.

Homeowners Association/Condo Fees

One of the biggest sticking points for sellers is the fees levied by their homeowners’ association (HOA) or condominium association fees.

Like other fees we’ve discussed, these will vary, not just because of the different rules and regulations of your local HOA but also because HOA regulations vary greatly depending on the state. These fees (or dues) are usually prorated at the time of the sale.

The average monthly HOA fee in Iowa is $389.

Seller’s concessions

Sellers in Iowa might be responsible for certain closing costs due to financing concessions negotiated during the sale. These concessions often cover expenses like closing costs, necessary repairs, or providing home warranties to the buyer.

One common type of seller concession is repair credits. This typically comes into play when a buyer includes a contingency in their offer, often tied to the home inspection. If the seller chooses not to address the repairs identified during the inspection, they can offer repair credits at closing instead of making the fixes themselves. However, it’s worth noting that such concessions are less frequent in seller’s markets, where contingencies might deter potential buyers.

Miscellaneous closing costs/fees

These are some of the most typical closing costs you might face as a seller in Iowa. However, remember that many of these costs are open to negotiation. Your buyer may be willing to compromise on certain expenses, or you might find that a real estate agent or attorney can assist in securing a more favorable deal.

If you want to minimize the stress of managing closing costs or working with an agent, you might want to explore HomeLight’s Simple Sale program.

This service streamlines the selling process into just three easy steps: provide basic details about your home, connect with one of our Home Consultants, and you could sell your home in as little as 10 days.

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