Who Pays Closing Costs When Selling a House By Owner?

Buyer FSBO closing costs

A buyer also will have their share of closing costs to pay when they purchase a home listed as FSBO. These include:

Loan origination and processing fees (1%-3% of the loan amount): Lenders charge these fees for the preparation and evaluation of the buyer’s mortgage. These fees may include expenses for underwriting, document preparation, and administrative work. Buyers should review their loan estimate carefully to understand all associated costs and consider negotiating with lenders for better terms.

Buyer’s attorney fees ($150-$500 an hour): Buyers who are not represented by an agent often hire their own attorney to guide them through the process of reviewing and signing contracts. This is especially important for ensuring that legal risks are mitigated when purchasing a home directly from a seller. An attorney’s expertise helps protect the buyer’s interests, ensuring all documents are legally sound and that no unexpected issues arise during the closing process.

Third-party appraisal ($400-$800): If a buyer is using a mortgage to purchase a home, a third-party appraisal is required by the lender to assess the property’s fair market value. This ensures that the loan amount doesn’t exceed the home’s value. The appraiser compares the home to similar properties in the area and assesses its condition, which helps determine its market value.

General and specialized inspections ($200-$500 for general, additional fees for specialized): Most buyers opt to hire a professional inspector to look under the hood of a home before they cement their purchase. A general inspection checks for big issues related to the home’s foundation, plumbing, electrical, HVAC, roof, and other main systems, while specialized inspections may check for termites, lead, or radon.

Negotiated or split fees

Some fees may be negotiated or split between buyer and seller in a FSBO transaction. A few examples include:

Seller concessions and closing cost credits (varies): A buyer may ask you to pay for certain concessions, such as cash to offset certain repairs, home warranty coverage, or a portion of their closing costs. Without an agent on your side to reject requests or negotiate on your behalf, these concessions can become fairly steep.

Settlement fees (1%-2%): The title company, escrow company, or attorney that facilitates the closing also will charge what are called settlement or escrow fees for handling the final paperwork and distributing funds to the appropriate parties.

The settlement fees generally are divided between the buyer and seller depending on what the purpose of the specific settlement fee is and what is customary in the market where the property is located, but who pays these fees can be up for negotiation in many instances.

Property taxes (varies): When selling a home, regardless of whether it’s FSBO or agent-assisted, the seller is responsible for paying any property taxes owed for the time they’ve owned the home up until the closing date. Conversely, the buyer will cover taxes from the closing date onward. This typically involves prorating the taxes, calculating a daily rate to ensure an equitable split between the seller and buyer, so each party pays only for the portion of the year they own the property. This ensures a fair adjustment for both sides.

Title fees (1%)
A number of title fees likely will be charged in any real estate sale, including:

• Title search ($75-$200): A title search is a process that examines public records to confirm the legal ownership of a property and identify any existing claims, liens, or encumbrances. The goal is to ensure that the title is “clear,” meaning there are no unresolved issues that would hinder the sale or transfer of ownership. During this search, any potential disputes, such as unpaid property taxes, mortgages, or legal judgments against the property, are flagged. This allows the seller to resolve them before closing, ensuring the buyer receives a clean title. The search typically involves reviewing historical property records, deeds, and court documents.
• Owner’s title policy (0.5%-1%): Imagine that after buying your home, a previously unknown heir comes forward with a legitimate claim to the property that wasn’t identified during the title search. Title insurance protects the homeowner from financial loss due to these rare but potentially expensive errors. It’s common for the seller to pay for this one-time policy to give the buyer peace of mind and ensure clear ownership.
• Lender’s title policy (0.5%-1%): This insurance safeguards the lender against financial losses from title defects or claims that may emerge after closing, covering up to the amount of the mortgage loan. It ensures that the lender’s interest in the property is protected, though it does not benefit the homeowner. Typically, buyers are responsible for paying this one-time fee as part of their closing costs.

Can FSBO sellers avoid closing costs?

Hypothetically a FSBO seller could ask a buyer to cover all their closing costs in addition to buying the home. But you’re not likely to find a buyer who’s willing to agree to those terms. As with any listing, a buyer is going to approach the situation looking to secure the best deal.

“In theory, the seller can make the buyer pay all the closing costs — but why would a buyer agree to that?” Rhyne says. “I doubt most people are going to read a one-sided contact and not notice. Rather, sellers have their own fees and buyers have their own fees with most contracts.”

Without an agent to negotiate in your favor, the contract could skew more buyer-friendly in the end.

“If I am the buyer’s agent and the seller is selling on their own, I am writing that contract pro-buyer,” shares top Dallas real estate agent Rach Potter. “My responsibility is to my buyer, so if I can get things taken care of for the buyer, I will.”

FSBO closing costs example

Bob and Mary sell FSBO

For example’s sake, let’s say fictional Bob and Mary decide to list their Savannah, Georgia, home FSBO. They aren’t sure how to price the home but after checking a few of their neighbors’ property values online, they choose an asking price of $200,000.

They use iPhone photos rather than professional photography and don’t stage the home. After several weeks of minimal interest and only a few casual inquiries from uncommitted buyers, they add a note stating they are willing to pay a buyer’s agent commission of 2.5%.

A buyer’s agent representing a buyer named Sally finally brings Bob and Mary a bona fide offer of $190,000. However, the agent negotiates a $10,000 price reduction after an inspector finds serious safety issues, bringing the sale price down to $180,000. Additionally, Sally requests a closing cost credit of $3,000, which Bob and Mary agree to.

Here’s how their net proceeds break down:

• Attorney fees: $500
• Buyer’s agent commission (2.5%): $4,500
• Outstanding mortgage balance: $50,000
• Title fees: $1,770
• Property taxes owed: $1,000
• Settlement fees: $885

After accounting for these closing costs, Bob and Mary see selling proceeds of about $121,000 and a time on market of eight weeks.

Could Bob and Mary have netted more with a real estate agent’s help? Maybe. The data says, in fact, it’s likely they would have.

According to the National Association of Realtors (NAR), agent-assisted sales sell for significantly more on average than FSBO sales. Our transaction data at HomeLight further echoes that real estate agents who are top of their market sell homes for as much as 10% more than the average agent.

A great real estate agent can help a seller achieve a higher price with advice on effective pre-listing improvements, targeted pricing (often without the costs of pre-listing appraisal), and negotiations through closing in effort to reduce their selling costs.

A real estate agent also puts some of their commission dollars toward staging and marketing the home so that it sells faster and for more, a service Bob and Mary did not receive by going FSBO.

Bob and Mary hire a top agent

Bob and Mary decide to take a different path and hire a top real estate agent to list their home. After reviewing a comparative market analysis (CMA), their agent suggests they could list for $20,000 more if they complete some light improvements, like enhancing curb appeal, deep cleaning, and decluttering. The agent also highlights that their home’s value is higher due to being in a desirable school district, popular among millennial buyers.

The agent takes professional photos and ensures the listing appears on all major real estate platforms and social media, quickly attracting buyer interest. During post-inspection negotiations, the agent manages to reduce a $10,000 repair request to just $5,000 and rejects a closing cost credit request, emphasizing the generosity of the original terms.

The final offer, after the $5,000 inspection adjustment, comes to $215,000. Here’s how the closing costs break down:

• Real estate agent commission: $12,900
• Outstanding mortgage balance: $50,000
• Title fees: $1,770
• Property taxes owed: $1,000
• Settlement fees: $885

With these deductions, Bob and Mary walk away with approximately $138,000. Plus, they secure an offer in just two weeks, selling faster than the average market timeline.

FSBO closing costs summary

If you’re looking to save on commission fees, the only way to fully bypass paying the 3% to 6% agent commission is for both the seller and buyer to come to the sale unrepresented and use an attorney to handle the paperwork. While this can save you a significant amount, it’s important to consider the potential risks and added responsibilities that come with selling your home solo.

Other key points to remember:

• In a FSBO sale, additional closing fees for attorney hours, transfer taxes, and settlement fees and more will still be deducted from your proceeds, amounting to about 1% to 4% of the sale price.
• If a buyer uses an agent, sellers may also be asked to pay all or part of the buyer’s agent commission, bringing total seller FSBO closing costs to approximately 4% to 7%.
• Buyers will often pay their own closing costs averaging 2% to 5% of the final purchase price with a good portion of those expenses going toward their mortgage-related fees.
• Elimination of the listing agent commission amounts to a savings of about 3%. However, home sales data shows that selling without an agent could result in a lower sale price, a risk sellers should consider in their decision to go FSBO.
• FSBO puts all the work on the seller to list the home and negotiate the contract. An attorney can fill in some gaps but can’t replicate the services of an agent.

If the prospect of FSBO seems overwhelming, HomeLight would be happy to introduce you to some quality real estate agents in your area for a consultation.

Header Image Source: (Sean Locke Photography / Shutterstock)