Beth:
Hi, I’m Beth with TB Properties Buys Land. In the past several videos, we have discussed the costs of selling your land. First we discussed the costs involved in getting it ready to list. In the next two videos we discussed the associated marketing and sales costs in terms of both money and time. Finally in today’s video, we’re going to discuss closing costs.
So what exactly are closing costs and what is involved? I’m going to answer that by walking you through two different scenarios when it comes to selling your property. The first example we will cover is the case in which you’ve sold your property yourself: you market it yourself, found a buyer for your property, etc. In the second example we will cover the costs of closing if you’re using a realtor. The key to understand and to plan for is that whether you are selling your property yourself or if you employ the expertise of a realtor, there are closing costs that are involved and those costs will detract from your bottom dollar in some shape or form. We point these out to enable you to properly plan in advance, especially if you need to use the proceeds of your land sale for something important.
As for what closing costs cover and who ultimately pays for those, this should all be called out explicitly within your contract. Let’s discuss what is included in closing costs. For one, there are escrow fees if you’re closing through a title company. These are the fees paid to the Title Company for their role in preparing the paperwork, doing the Title search and closing the transaction. The buyer and the seller generally split the closing costs, and they may be called out as “buyer escrow fees” and “seller escrow fees.” With this said, there is always the potential for negotiation with regard to who pays the escrow fees and it is possible to negotiate that one side can pay both buyer and seller escrow fees. Today’s buyers are more savvy and willing to negotiate so definitely be aware that a potential buyer may negotiate that you as the seller pay all the closing costs in order to sell your property. In order to secure the deal you may just have to say yes.
A second item to discuss with regard to closing costs is title insurance. Most of the time you want title insurance for the property, which is something the seller pays for in most splits. Be aware that the cost of title insurance is a percentage of your property’s sell price. You can call your local Title Company and request a quote on closing fees and their breakdown so that you can properly prepare. Another cost to consider is that in your particular county and state there may be excise taxes, the taxes paid on the sale of your property. There will also be recording fees that are paid to the county for recording the transaction at the county level. As you can see, the fees can add up when it comes to selling your property. On top of this – what about property taxes? Have you paid them in full? If not, generally those will be prorated and paid at the time of closing.
As a land seller, if you’re selling your property on your own, there are several costs to consider but it is very easy to reach out to a title company that’s licensed to sell or to transact within the county where your property is located and ask them, “Can you please provide me an estimate of what the closing costs are going to be?” That way you have an idea of what to remove from the potential profit.
Now if you’re working with a realtor, understand that all these closing costs are going to be included, but you’re also going to have an additional realtor fee. As we have discussed in earlier videos, a land realtor will often split 10% of the sale price as their commission. Understand that the realtor fee is 10% of the sale price, not your profit, and it will be split between the realtors. 10% is a good amount of money, so be sure to factor that in when it comes to selling your property.
Hopefully this gives you an idea of what to anticipate and plan for when it comes to closing costs when welling your vacant land. Although this is not professional advice, we believe it is best to work with a title company for security reasons. It is worthwhile reaching out to them and requesting an estimate. That can be really helpful to know when it comes to negotiating the sale of your property. Do keep in mind that if you have not had your land surveyed recently and the title company is saying, “Hey, we don’t have a good survey on file, you have to have a survey in order to close on the property,” be sure to factor that into your closing costs as well.
One last thing to factor in when it comes to closing costs is timing, especially if the proceeds are needed quickly. When it comes to selling your bare land, a lot can delay the closing. One thing to consider is whether your potential buyer is paying in cash or if they’re seeking a loan. If the buyer is seeking a loan, that could take some additional time to close. If an appraisal is needed, you’re awaiting an appraiser to get out there, put together their report and finally get it back to the bank or the lender. Then lender’s got to do their part. If the transaction is a cash transaction, you could factor in about three to four weeks, depending on your title company. If there is a lender involved, it could be 6, 7, 8 weeks or longer. It just depends on the situation.
Hopefully this video series has answered some questions on the cost of selling your land. There are most definitely costs when it comes to selling your land. These include getting it ready to list, in marketing it, as well as closing costs. If you don’t want to go through all of this, and if you want to make this easy, please feel free to reach out to TP Properties Buys Land. We are real estate investors and we pay you in cash. You don’t have to get your property ready, you don’t have to market your property at all. And best of all, we cover all the closing costs when it comes to selling your land. We provide you with a one-page purchase agreement. We close through a reputable title company that is licensed to transact the county where your property’s located. In this manner we are able to close quickly and safely. So we look forward to hearing from you. Feel free to reach out via phone or email across our website and we’ll talk to you then. Thanks.