FSBO Closing Costs in Michigan Explained

Understanding closing costs for for sale by owner sellers in Michigan. If you're selling your home on your own in the state of Michigan, you might think you're saving thousands in commissions. But if you don't understand closing costs, you could be blindsided by unexpected fees. In this video, I'll break down exactly what you'll need to pay attention to at closing as a FSBO seller in Michigan. And how to keep more money in your pocket. So let's roll up our sleeves here, get to work, and let's go. First, what are closing costs? These are the expenses that come with finalizing the sale of your home. And if you're not using realtors and don't have to pay those, those pesky real estate commissions, then they should be somewhere between 1% and 3% of the sales price. While buyers typically cover some of those closing costs, as a for sale by owner seller, you'll have your own share of expenses. Let's go over what you'll be responsible for. All right. So here's a seller closing cost breakdown. Number 1, title insurance. In Michigan, the cost of an owner's title insurance policy varies on the property sale price. With rates typically ranging from about 0.5% to 1% of the home's purchase price. These premiums are one-time fees paid at closing and provide coverage for as long as you or your heirs own the property. In this case, the buyers. If you're providing the title insurance to the buyer, then it covers the buyers or the buyer's heirs for as long as they own the property. Within certain boundaries. For example, I've shot a separate video on the difference between a quitclaim deed and a warranty deed. There are some exceptions to that. If a buyer were to later quitclaim deed the property rather than using a warranty deed, that can cause title insurance to cancel. However, for the most part, an owner's title insurance policy protects that new owner from title claims, claims against the ownership later on. And the title insurance policy basically takes care— within certain constraints. That's the other thing is you want to make sure that you read the title insurance policy for any exemptions and those kinds of things. But anyway, that's what title insurance does. It protects a buyer, the new owner of the property, from future claims against the title. Claims of ownership from people that kind of come out of the woodwork. It's important to note that rates for this title policy can vary slightly between title companies. For a precise estimate tailored to your property specifications, consider using online title insurance calculators provided by reputable Michigan title companies. These tools allow you to input your property sale price, and receive an estimated premium. I'll be shooting a separate video where I walk you through one of these online title insurance calculators. So that's another reason to hit that subscribe button so that you'll be in the know about these videos that are coming up as extensions of the videos that I'm currently shooting. All right. Number 2, transfer taxes. Michigan charges a state and county transfer tax when real estate changes hands. Here's how it breaks down. State transfer tax is $3.75 per $500 of the sales price. County transfer tax is $0.55 per $500 of the sales price. For example, if you sell your home for $300,000, you'll pay about $2,250 in transfer taxes. Okay. Number 3, prorated property taxes. In Michigan, property taxes are usually paid in advance. Your title company will calculate the exact amount owed at closing. Title companies handle that tax proration for you as a seller. You may want to double-check their math, but that is something that's generally handled by the title company. All right. Number 4, title company or attorney fees. Even FSBO sellers closing without the assistance of real estate agents still need a title company or an attorney to handle all of that closing paperwork. Expect to pay between $500 and $1,500 for the service. All right. Next, we need to think about HOA fees, if applicable. If your home is in a homeowners association, you may have to pay an HOA transfer fee or settle any unpaid dues. These costs vary, so check with your HOA early in the process. Whenever I close a deal, the title company's asking for the contact people for the HOA. They need to settle up with the homeowners association as part of that closing process. So if you're handling the sale on your own, probably the title company will help you through how to handle this whole thing with the homeowners association. All right. Next, outstanding mortgage payoff. If you still have a mortgage on the home, your lender will provide a payoff statement at closing. Be aware that some lenders charge a small fee to process this transaction. This is something that I handle all the time on behalf of my clients. It's something that usually is generated, sent to me from the title company. So make sure that you are coordinating that with whoever's handling your closing. You get that mortgage payoff because it's required to pay off. If you have a mortgage on the home that you're selling, you need to pay that off at closing. All right. Next, buyer's agent commission, if that's a part of your deal, even though you're a for sale by owner seller selling without an agent representing you. You may be working with a buyer's agent who brings you a qualified buyer. I work with a lot of for sale by owner sellers, and typically they are offering a buyer's agent commission to incentivize the sale of their home. So you have to factor that in whatever you've agreed to. And these days in the post-NAR, uh, national lawsuit, I think it should be spelled out in your buy-sell agreement, your purchase agreement, offer to purchase, whatever we're calling it. In that initial offer to purchase it, that, uh, commission that's going to be paid the buyer's agent, if you are paying it as a seller, get that spelled out clearly within that purchase agreement. Typically in our area, it's somewhere around 2.5 to 3%. But that's negotiable. You as a for sale by owner seller, just know that it's negotiable. You don't have to be paying any buyer's agent commission. So it's usually around 2.5 to 3%. So remember, you can choose to pay that or negotiate, but once you've agreed to it in a contract, now you'll be obligated to pay whatever you've agreed to that is explicitly stated in that buy-sell or purchase agreement. All right. How do I reduce closing costs so that you can put more money in your pocket? Here are a few tips. Negotiate with the buyer. Some buyers are willing to pay and cover certain closing costs, so don't be afraid to ask. It really is going to come down to, though, the costs are the costs. And if you're going back and you have to be cautious about how much going back and forth you're going to do with the buyer because Obviously, whatever closing costs they are covering, that's just increasing their total cost that they're paying for your property. So be careful with that. But that is an option to negotiate if for whatever reason they're willing to pay your closing costs, I suppose take advantage of them. All right. You can also shop around for title services. Different title companies charge different fees. So get quotes to find the best deal. Next, confirm your mortgage payoff amount early. This helps you avoid last-minute surprises. Also, check for tax exemptions. Michigan offers some exemptions on transfer taxes, such as for family sales or certain veteran benefits. Final thoughts. Selling your home for sale by owner means taking full control of the process, but that also means knowing exactly what you'll owe at closing. Hopefully this breakdown helps you avoid any surprises. If you found this video helpful, be sure to like, subscribe, and check out my For Sale by Owner playlist for more tips on selling your home on your own successfully. Thanks for tuning in. I'm Sander Scott, your full-service realtor, and hey, It costs you so little and it means so much to me and to the channel. Click that subscribe button. All right, thanks. We'll see you in the next video.