When you sell your house by owner, closing costs generally split along customary lines: the seller pays transfer taxes, the owner’s title insurance policy, the mortgage payoff, and prorated property taxes through the closing date, while the buyer pays loan fees, lender’s title insurance, government recording charges, and the inspection. Every one of those items is negotiable, and in an FSBO deal the purchase agreement is where the split becomes binding. Get it in writing line by line, or expect a fight at the closing table.
What the Seller Usually Pays
Transfer taxes are often the single biggest seller cost. These are state or local taxes triggered when the property changes hands. About a dozen states charge nothing; others charge anywhere from a fraction of a percent to over 2% of the sale price. In some areas the tax is split with the buyer, and in others the seller pays it all by custom. Your title company or closing attorney can tell you what applies where the property sits.
The owner’s title insurance policy is customarily a seller expense. It protects the buyer against claims tied to the property’s ownership history: liens, boundary disputes, recording errors, unknown heirs. The premium is usually calculated as a percentage of the sale price, often around 0.5% to 1%. On a $350,000 home that runs roughly $1,750 to $3,500, with rates varying by state and insurer.
Property taxes are prorated. The seller pays through the day before closing and the buyer picks up the rest of the billing period. Depending on whether taxes have already been paid for the period, the adjustment shows up as a credit to the buyer or a charge to the seller on the settlement statement.
If you still owe a mortgage, you’ll pay off the loan balance plus accrued interest at closing, along with a small charge for the lender to release the lien. Recording the release and any wire fees usually add up to somewhere between $25 and $75.
A one-year home warranty is optional. Some sellers offer one as a comfort item for the buyer, with basic plans running $350 to $700. It isn’t required and isn’t customary; it’s a negotiating tool.
What the Buyer Usually Pays
Buyer closing costs revolve around the loan. The appraisal, required by nearly every mortgage lender, runs $300 to $500 for a standard single-family home and more for complex or rural properties. Loan origination fees, credit report charges, and any discount points appear on the Loan Estimate, which the lender must deliver within three business days of receiving the buyer’s application.1Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs
Lender’s title insurance is a separate policy from the owner’s policy the seller provides. It protects the mortgage company’s interest in the home and is required for the loan to close. Government recording fees, charged by the local recorder’s office to document the new deed and mortgage, are also a buyer expense.2Consumer Financial Protection Bureau. What Are Government Recording Charges for a Mortgage Amounts vary significantly by county and state, so ask your title company for a quote early.
Home inspections typically run $300 to $500 depending on the home’s size and location, paid out of pocket before closing. If the property sits in a FEMA-designated flood zone, the lender will require flood insurance for the life of the loan, and the first year’s premium must be escrowed at closing.3eCFR. Part 339 – Loans in Areas Having Special Flood Hazards Plan for that as additional closing-day cash.
Buyer-Agent Commission After the NAR Settlement
This is where things changed for FSBO sellers. Before 2024, FSBO sellers routinely offered 2.5% to 3% of the sale price to the buyer’s agent because the system practically required it. The NAR settlement that took effect in mid-2024 changed the mechanics. Offers of buyer-agent compensation can no longer be published on the MLS, and buyers are now required to sign written agreements with their agents spelling out exactly how the agent will be paid.
Two consequences for a for-sale-by-owner seller. First, you’re no longer expected to advertise a commission to attract buyer agents. Second, a buyer’s agent may still ask you to cover their fee as part of the negotiation, but it’s a negotiation now, not an assumption. Some buyers pay their own agents directly. Others ask sellers to contribute toward the commission as a concession folded into the price. The amount, if any, is whatever the parties agree to in the purchase contract.
Refusing to work with represented buyers shrinks your buyer pool significantly, since most serious buyers still use agents. The practical approach is to treat buyer-agent compensation like any other closing cost: a line item to negotiate based on local conditions and your leverage.
HOA Fees at Closing
If the property is in a homeowners association, expect two additional line items. The seller typically pays for the estoppel certificate, the document the HOA issues confirming what the seller owes in assessments, fees, and any outstanding violations. Fees vary, but many states cap what the HOA can charge. The buyer typically pays the capital contribution or transfer fee the HOA charges the incoming owner to fund reserves. Both are negotiable like everything else.
Attorney or Title Company Costs
In a traditional agent-assisted sale, the listing agent coordinates closing. When you sell by owner, someone else has to fill that role, and in some states the law requires it to be an attorney. Roughly half a dozen states mandate attorney involvement at closing, with the specific requirements ranging from full representation to document review. Flat fees for a residential closing typically run $500 to $1,500, and the attorney handles title review, document preparation, and fund disbursement.
Where attorney involvement isn’t mandatory, a title company fills the same role. The title company runs the title search, issues the title insurance policies, holds earnest money in escrow, and acts as the settlement agent. Their fees are rolled into the title insurance premium and closing charges. Either way, you need a neutral third party running the closing. Trying to handle settlement yourself invites errors that can unwind the deal.
Get the Split Into the Purchase Agreement
Every closing cost needs a specific party attached to it in the purchase agreement before anyone signs. Vague language like “seller pays customary closing costs” is an invitation to dispute at the closing table. The contract should name each line item — transfer taxes, title insurance, recording fees, HOA charges, buyer-agent compensation if any — and say whether the buyer or seller is responsible.
Start by asking your title company or closing attorney for a preliminary settlement estimate based on the expected sale price. That document lists every anticipated fee with real dollar amounts, so you’re negotiating from numbers rather than guesses. Once the parties agree on who pays what, those terms go into the contract with specificity. The escrow officer or attorney can’t prepare accurate closing documents without them.
Prorations
Property taxes and some utilities get prorated based on the closing date. Divide the annual or periodic cost by the number of days in that period for a daily rate, then multiply by the days each party occupies the home. If you close on March 15 and you’ve already paid property taxes through June, the buyer credits you for March 15 through June 30. If you haven’t paid yet, you credit the buyer for the days you lived there. Prepaid fuel oil, well water service, and similar consumables may be prorated too, depending on local custom.
Earnest Money
The buyer’s earnest money deposit, typically 1% to 3% of the purchase price, goes into an escrow account held by the title company or attorney and gets applied to the buyer’s closing costs or down payment at settlement. Make sure the contract specifies who holds the deposit and under what conditions it’s refundable. Never let the buyer hand you a check directly. It should always go to the escrow holder, or you’ll end up fighting over custody of the funds if the deal falls apart.
Tax Reporting FSBO Sellers Shouldn’t Miss
Selling triggers federal tax reporting that FSBO sellers sometimes overlook because there’s no agent nudging them through it.
Form 1099-S
The settlement agent, title company, or attorney handling your closing is responsible for filing Form 1099-S with the IRS to report the sale price. There’s an exception. If the sale price is $250,000 or less ($500,000 for a married couple) and the seller certifies in writing that the home was their principal residence and the full gain qualifies for exclusion, the closing agent doesn’t have to file.4Internal Revenue Service. Instructions for Form 1099-S Proceeds From Real Estate Transactions Even when no 1099-S is filed, you may still need to report the sale on your return if your gain exceeds the exclusion.
Capital Gains Exclusion
You can exclude up to $250,000 of profit from the sale of your primary residence, or up to $500,000 filing jointly. To qualify, you generally must have owned and lived in the home for at least two of the five years before the sale. Spouses can meet the ownership and use tests during different two-year periods, as long as both tests fall within that five-year window.5Internal Revenue Service. Topic No. 701, Sale of Your Home Gains above the exclusion are taxed as capital gains.
FIRPTA Withholding for Foreign Sellers
If the seller is a foreign national, the buyer is legally required to withhold 15% of the sale price and remit it to the IRS under the Foreign Investment in Real Property Tax Act. The rate drops to 10% if the buyer intends to use the home as a residence and the sale price is $1,000,000 or less. No withholding is required if the sale price is $300,000 or less and the buyer will use the property as a residence.6Office of the Law Revision Counsel. 26 U.S. Code 1445 – Withholding of Tax on Dispositions of United States Real Property Interests Most FSBO sellers are U.S. citizens and this won’t apply. If either side is a foreign person, the withholding obligation falls on the buyer and has to be handled at closing.