Closing Costs - Sellers
Seller's closing costs will vary from deal to deal depending on the sales price, overall terms of the contract and the real estate agent you choose. There are some common similarities that you will find outlined below. If you have any other questions about selling real estate in Ocean City MD or want to discuss this in greater detail feel free to contact me directly anytime at 443-614-9179.
Property Transfer and Recordation Charges
The state and local municipalities charge transfer taxes and recordation charges on all of the property sales that occur in the state of Maryland. In the Ocean City real estate market area these charges total 1.66% of the subject property's sale price. As an example, on a $500,000 property sale there would be a total of $8,300 in transfer and recordation charges due at settlement. Per the standard Maryland contract of sale the transfer and recordation charges are shared equally between the Buyer and the Seller. Based off of the previous example each party would be responsible for $4,150 of transfer and recordation charges at the time of closing. As with just about everything else in a real estate transaction the handling of how these charges will be paid is negotiable depending on the overall terms and structure of the deal.
Commission rates typically range from 5% to 6% depending on the Ocean City real estate agent you choose and the Seller is usually responsible for this fee. The total commission is then split (usually equally) between the Listing Agent whom represents the Seller and the Selling Agent whom represents the Buyer. The commissions are collected from the proceeds of the sale and paid at the time of closing. Assuming a 5% commission rate, 2.5% would go to the Listing Agent and 2.5% would go to the Selling Agent. There are some real estate agents that keep a larger portion of the total commission on the listing side. This is something that you want to watch out for as this practice can potentially deter Buyer's Agents from showing your listing. In most instances if the Agent you hire to list your property also sells it to the Buyer then the commission rate is reduced. As an example, my standard commission rate is 5% for the properties that I list and represent. This 5% is then split equally between the Agent that represents the Buyer of the property and myself. In the event that I list the property and also sell it to the Buyer the commission rate is automatically reduced from 5% to 4%.
Prorations and Adjustments
You will be reimbursed at closing for any items that you have paid in advance such as property taxes, condo fees, water bills, etc. These items will be prorated down to the day of settlement, apportioned accordingly and you will be credited back the remaining amount. Conversely, any outstanding bills or charges will be brought current and paid at the time of closing from the proceeds of the sale.
Association Resale Packages
If the property you are selling is part of a homeowners or condo association you will be required to provide the Buyer with a resale disclosure package from the respective association. Most associations charge between $200 and $300 for their resale packages and they are not required until there is a ratified contract in place. I take care of coordinating this step for my clients and at the appropriate time I will order and distribute the resale package to all of the respective parties.
Maryland Non-Resident Withholding Tax
If you are selling real estate in Maryland and are not a resident of Maryland you could potentially have withholding taxes to deal with. If there are proceeds coming to you from the sale of the property on the final settlement statement and you are not a resident of Maryland the title companies are instructed to withhold taxes on these amounts. The withholding tax amounts are currently 7% for individuals and 8.25% for entities. The problem with this process is that it does not take into account what you paid for the property, carrying costs, improvements, etc. To avoid the unnecessary portion of these withholding taxes you can file for an exemption prior to settlement and the title company will then be instructed to collect or not collect accordingly. This is a fairly easy and straight forward process that the agent you hire should assist you with. When I am assisting out of state clients I initiate this process as soon as we have a contract in place and see it through to its conclusion.
Title Transfers and Mortgage Releases
Any outstanding mortgages or other liens against the property will be paid off at the property closing from the proceeds of the sale. There will be some fees ($150-$250) associated with obtaining and recording the releases of these items.
These are all of the customary closing cost items one can expect when selling real estate in Ocean City, MD and the surrounding areas. As I mentioned previously every real estate deal is different and there are other items that could arise, however they would be for negotiated scenarios or unusual situations. If you have additional questions or want to discuss this in greater detail feel free to contact me directly anytime at 443-614-9179.