When you sell a house, you generally pay the larger share of closing costs — commonly six to ten percent of the sale price once agent commissions are included — while the buyer pays a separate set of costs tied to their mortgage, usually two to five percent of the loan amount. The exact split is set by your purchase contract, local custom, and whatever leverage each side has at the negotiating table.
What Comes Out of the Seller’s Proceeds
The biggest line item is almost always the real estate agent commission. If you list with an agent, that fee is paid from your sale proceeds at closing, and the rate is fully negotiable. You may also agree to help cover the buyer’s agent compensation, though that is no longer automatic.
State and local transfer taxes are the next common seller expense. They fund the recording of the deed and are calculated as a percentage of the sale price or as a flat rate per dollar of value transferred. Amounts vary widely by jurisdiction, and some areas impose no transfer tax at all. Which side pays is usually dictated by local custom, but the contract can assign them to either party.
Sellers are also typically responsible for delivering a clear title. That means paying for a title search to confirm no outstanding liens or claims exist, and often purchasing an owner’s title insurance policy that protects the buyer against future title disputes. Recording fees to document the satisfaction of your existing mortgage, preparation of the new deed, and any required affidavits round out the standard seller expenses. Some sellers also agree to provide a home warranty or pay for specific inspections required by the contract.
And of course, the payoff on your existing mortgage comes out of the proceeds. Your lender’s payoff statement will show the remaining principal, accrued interest, and any prepayment penalty owed at closing.
How Real Estate Commissions Work After August 2024
Before August 2024, the seller’s listing agreement almost always bundled compensation for both the listing agent and the buyer’s agent, with total commissions typically around five to six percent of the sale price. That changed when the National Association of Realtors finalized a settlement that reshaped how agent compensation is structured.
Under the current rules, offers of compensation between agents can no longer appear on Multiple Listing Service platforms. Buyers are now required to sign a written agreement with their agent before touring homes, and that agreement must spell out, in specific and objective terms, exactly how much the buyer’s agent will be paid. It must also state clearly that commissions are fully negotiable and not set by law.
You can still offer to help cover the buyer’s agent fee, but any such offer happens outside the MLS, through the listing agent, the purchase contract, or other marketing channels. You can also offer buyer concessions on the MLS, such as credits toward the buyer’s closing costs. In practice, many sellers still contribute to the buyer’s agent compensation as part of the deal. It just isn’t assumed.
What the Buyer Pays
Knowing which costs belong to the buyer helps you spot where the line falls in your own transaction. Buyer closing costs center on the mortgage. Loan origination fees cover the lender’s administrative costs and often run around one percent of the loan amount. Lenders also charge for a credit report and an appraisal.
A lender’s title insurance policy is nearly always the buyer’s responsibility. It protects the lender, not the buyer, against title defects, and most institutional lenders require it as a condition of financing. Buyers also typically pay for a professional home inspection, and if the property sits in a federally designated flood zone, the lender will require flood insurance. The National Flood Insurance Program generally imposes a 30-day waiting period before coverage takes effect, but there is no waiting period when flood insurance is purchased as part of a mortgage closing.1National Flood Insurance Program. Buy a Flood Insurance Policy
At closing, buyers fund an escrow account to cover several months of property taxes and homeowners insurance premiums, and they pay settlement or attorney fees for reviewing loan documents and conducting the closing. Altogether, buyer closing costs generally run between two and five percent of the loan amount.2Fannie Mae. Closing Costs Calculator
When Sellers Agree to Cover Buyer Costs
The standard split is a starting point, not a fixed rule. In many transactions, the seller agrees to pay some or all of the buyer’s closing costs through a seller concession. You credit a specific dollar amount or percentage toward the buyer’s expenses, reducing how much cash the buyer needs at closing while keeping the sale price at a level both parties accept.
Market conditions drive most of these negotiations. When homes sit longer and inventory is high, sellers are more willing to offer concessions. When demand outpaces supply, buyers often drop concession requests to make their offers more competitive. Either way, concessions reduce your net proceeds dollar-for-dollar.
Program Limits on Concessions
Federal and government-backed lending programs cap how much a seller can contribute toward a buyer’s financing costs. For conventional loans backed by Fannie Mae, the caps depend on the buyer’s down payment:
- Down payment under 10% (LTV above 90%): capped at 3% of the sale price or appraised value, whichever is lower
- Down payment between 10% and 24.99% (LTV 75.01%–90%): capped at 6%
- Down payment of 25% or more (LTV 75% or less): capped at 9%
- Investment properties: capped at 2% regardless of down payment
VA loans handle concessions differently. The VA does not limit credits toward a loan’s standard closing costs, but it caps what it calls “seller concessions” (items like paying off the buyer’s debts, prepaying hazard insurance, or covering the VA funding fee) at 4% of the home’s reasonable value.4Veterans Affairs. VA Funding Fee and Loan Closing Costs
FHA loans generally allow seller concessions up to 6% of the sale price. Concessions exceeding any program’s limits must be deducted from the property’s appraised value, which can affect the loan amount the buyer qualifies for. Every concession agreement must be documented in the purchase contract to be recognized by the lender.
Taxes You May Owe on the Sale Itself
Selling a home can trigger federal tax obligations that affect your bottom line. If you sell your primary residence for a profit, you may be able to exclude up to $250,000 of the gain from your taxable income, or up to $500,000 if you are married and file jointly. To qualify, you generally need to have owned and lived in the home for at least two of the five years before the sale.5Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
The settlement agent handling your closing is generally required to file Form 1099-S with the IRS, reporting the gross proceeds. If you certify in writing that the home was your principal residence and the full gain qualifies for the exclusion, the settlement agent does not need to file the form, provided the sale price is $250,000 or less ($500,000 or less for married couples filing jointly). Without that certification, the agent must file regardless of whether you owe tax on the gain.6Internal Revenue Service. Instructions for Form 1099-S Proceeds From Real Estate Transactions
If the seller is a foreign person, the buyer (or the buyer’s agent) is generally required to withhold 15% of the total sale price under the Foreign Investment in Real Property Tax Act and remit it to the IRS. Reduced withholding or exemptions may apply, but foreign sellers should plan for this significant upfront reduction in their proceeds.7Internal Revenue Service. FIRPTA Withholding
Estimating Your Net Proceeds
Before closing day, pull together the numbers that will actually determine your walk-away amount. Start with a mortgage payoff statement from your lender showing the exact balance needed to satisfy your loan, including principal, accrued interest, and any prepayment penalty. Request it close to closing, since the payoff amount changes daily as interest accrues.
You will also need your most recent property tax bill. Property taxes are prorated at closing based on the number of days each party owns the home during the tax period. If you have prepaid taxes for a period that extends past closing, you receive a credit; if taxes are due but unpaid, the amount is deducted from your proceeds.
If your home is in a community governed by a homeowners association, check the transfer requirements. Many associations charge a transfer fee, a capital contribution, or require an estoppel letter confirming your account is current. Your signed listing agreement confirms the commission percentage owed to your brokerage. Pulling all of this into a preliminary net sheet, something your agent or settlement company can help prepare, gives you a realistic picture of what you will take home before you sit down at the closing table.