Closing costs in Tennessee may vary for each transaction. So sellers should know how much they will have to pay before listing their homes.
Selling your home is an exciting prospect, especially when you are about to move on to greener pastures. But just because you are selling your property does not mean you will see every dollar of the final selling price in your bank account after closing the deal. There are costs for selling a property. As a seller, you should know what these costs are so you can come prepared.
Table of Contents
- What Are Closing Costs?
- How Much Are Seller Closing Costs in Tennessee?
- Who Pays Closing Costs in Tennessee?
- Other Costs to Expect When Selling Your Home in Tennessee
- How to Calculate Closing Costs in TN?
In a real estate transaction, even sellers will run into costs they need to pay. And many homeowners are surprised to find how high these fees can go. Most sellers pay for these costs from their sale proceeds. In rare cases, your profit from the sale may not be enough to cover the closing fees. If this happens, you’ll need to pay the costs out of pocket.
Paying for the closing costs out of pocket is something that you need to avoid. That’s why you need to know how much you expect to spend after the sale to avoid unpleasant surprises.
If you’re selling a house in Tennessee, this article will help you get a better idea of how much you will spend when finalizing your home sale. Understanding the closing costs in Tennessee and other fees, you need to pay after the sale is important. It ensures you’re prepared and you have enough profit margin to cover such costs.
What Are Closing Costs?
Closing costs are the expenses on top of the property’s price that both buyers and sellers usually pay in order to complete their real estate transaction. These costs may include title search and transfer fees, insurance, loan fees, and taxes, among other things.
Even if you sell your property to a relative or close friend for below market value (also known as gifts of equity), you may still have to pay certain closing costs. In general, closing costs are third-party fees needed to complete the home sale transaction. For instance, they include real estate attorneys and mortgage lender fees.
Federal law requires closing costs to be disclosed—usually by the mortgage lender—to the buyer and seller. The two parties must then agree on who will pay for which expense before they can officially complete the real estate transaction.
As a seller, most of your closing costs will be deducted from your sales proceeds. But there are a few expenses that you will have to pay out of pocket at closing.
How Much Are Seller Closing Costs in Tennessee?
As a seller, the average closing costs in Tennessee you might have to pay are around 1.5% of your home’s final sale price. This figure could go higher depending on the other costs, as well as on whether or not you would give a buyer incentive. So if you sell your home for $200,000, you would pay around $3,000 (more or less). Then the buyer will cover the other closing costs.
If you’re asking how much are closing costs in TN, check the following list. Here are the typical fees that you need to be aware of and prepare for:
1. Title Service and Closing Fees
When selling your home, you have to transfer the legal ownership of the property to the buyer. Before that, however, a settlement agent has to do a title search to make sure that no one else has a legal claim to the property in the form of liens or other encumbrances. The title service and closing fees cover the costs of title search and transfer of the title to the buyer’s name.
The title service and closing fees are around 0.47% of the purchase price. Such fees will pay the agent responsible for searching and transferring your title. It may also include the costs of other services related to closing the sale. It’s best to ask your agent for a breakdown of the fees that you need to pay.
In Tennessee, the buyer and seller will pay for their title company or closing agent. But both parties can negotiate on this.
2. Owner’s Title Insurance
An owner’s title insurance policy protects the buyer in case a problem arises regarding the previous title ownership. It protects buyers from specific issues, including clerical errors in the paperwork and serious problems like full disputes over ownership. This policy covers any fees for legal representation. It may also reimburse the value of a home if mistakes were made.
The average cost of the owner’s title insurance in Tennessee is around 0.56% of your home’s sale price. For example, if you sell your house for $200,000, the owner’s title insurance is around $1,120.
It’s worth noting that the specific rate may vary depending on the title company. In Tennessee, these companies usually have tiered pricing to determine how much you will pay for a policy based on your home’s value.
So who pays for title insurance in Tennessee? The seller usually covers this, but it is also possible to negotiate this with your buyer. In some cases, buyers pay for this expense for their protection.
3. Tennessee Transfer Tax
Transfer tax is one of the most common closing costs for sellers. The state of Tennessee will charge you about 0.37% of your property’s sale price to transfer the title to the new owner. If your selling price is $200,000, you will pay around $740 in transfer taxes.
Note that your county or city may also charge their own transfer taxes. It’s crucial to check with your real estate agent or title company about this. Ask for a complete breakdown of the taxes you need to pay depending on your area.
4. Tennessee Recording Fees
Your state or local government will also charge a fee for legally recording the change in the property’s deed and mortgage information. The fee for this is usually fixed regardless of your selling price.
The exact amount varies depending on your location. But you be prepared to pay around $156. It’s best to check the official website of your county to determine the exact amount you need to prepare for the recording fee. Also, note that you may be able to negotiate with the buyer to cover this cost.
5. Property Taxes
In Tennessee, your county may collect property taxes for the current year at the end of each year. If that is the case in your area, you will pay property taxes at closing for the portion of the year that you owned your home. That way, the buyer will not have to pay taxes for the entire year when they have only owned the house for a few months.
But in case you live in an area where you pay property taxes at the beginning of the year, then the buyer would reimburse you at closing for the remaining months.
The exact amount of property taxes varies depending on your location. Make sure to check with your city or county to determine how much you need to pay.
6. Buyer’s Incentives
In a buyer’s market where sellers need to compete for sales, offering a buyer’s incentive is a great way to attract offers.
As a seller, you can choose what incentives to provide. The most common ones include covering a portion of the buyer’s closing costs or providing free repairs. You can also set a fixed-rate incentive, usually 2% of the selling price.
7. Additional Closing Costs for Sellers in Tennessee
Every real estate transaction is unique. Remember that in each transaction, you may encounter costs you will not always see in every sale. So, what fees do sellers pay when selling a house besides what was already mentioned?
Here are a few examples of other closing costs that sellers may need to pay in Tennessee:
- HOA transfer fees – If your property is under a homeowner’s association, you need to pay any unpaid dues for the period before the sale.
- Seller attorney fees – If you hire the services of a real estate attorney, be prepared to pay legal fees.
- Property appraisal fees – You need to have your property appraised before you list it for sale to determine its value.
- Mortgage payoff or prepayment penalties – If you have an outstanding balance on your mortgage, you need to pay it off first before you can sell your property. Some lenders may also charge mortgage prepayment penalties. You also need to settle this to be able to sell your house.
- Pest inspection – To ensure that your property is in good condition, it’s recommended to have it inspected for possible pest infestations. Hire a professional pest inspector to do this. Of course, there’s a fee associated with it, and the seller should be the one to cover the cost.
If you’re asking how much are closing costs for sellers, the above estimations can help you have a reference point. Note that these calculations are only estimates. The actual costs may vary depending on the actual selling price of your home and how much you can negotiate for the buyer to cover.
Who Pays Closing Costs in Tennessee?
Both the buyer and seller share the responsibility for paying the total closing costs at the end of the transaction. But it will not be an exact 50-50 split.
In Tennessee, sellers usually pay for the title service and closing fees. Sellers should also cover title transfer taxes, owner’s title insurance, and recording fees. But you may negotiate with the buyer to cover more closing costs. Some sellers offer a discount rate from the selling price so that buyers will agree to cover part of the closing costs.
Related: Are There Disadvantages of Seller Paying Closing Costs on Behalf of the Buyer?
Other Costs to Expect When Selling Your Home in Tennessee
Closing costs are not the only expenses you will have to pay when selling your home. You may also have to deal with other expenses related to the sale. Here are a few costs you should also prepare for:
Costs for Preparing Your Home for Sale
To make your home attractive to potential buyers, you must ensure it’s visually appealing. You need to perform repairs, cleaning, landscaping, and staging. You would want to prioritize high-impact items such as cleaning the carpets, repainting the walls, and fixing some repair issues.
These costs can vary greatly depending on how outdated or neglected your home is prior to selling. A good rule is that the total costs should not exceed 3% of your asking price. If it does, then consider selling your property as-is. It will save you from having to do any repairs or freshening up.
Real Estate Agent Commission Fees
Paying your real estate agent’s commission would probably be the highest cost related to selling your house. In Tennessee, agents’ commissions range from 5% to 6% of your selling price. The good news is that this is not the fixed rate. It means you can negotiate it with the agent.
Aside from your real estate agent, you might have to pay for the commission of your buyer’s agent as well. Keep in mind that your real estate agent will handle the marketing of your home sale as well as the transaction itself. So the benefits of having an agent may be worth the high cost.
Are you skeptical about paying this much fee? Then you could look into alternatives like hiring a real estate broker or doing an FSBO (for sale by owner).
Related: For Sale by Owner: Disadvantages and Why You Shouldn’t Do It
Negotiable Items
Because selling your house will involve a lot of negotiating, it would be prudent to set some budget aside for any concessions you might make. For example, a buyer might ask you to pay for certain closing costs that they would typically pay for. Mortgage lenders allow this up to a certain amount.
Also, after signing the purchase agreement with the buyer, they will most likely do a home inspection. If they find an issue, they could request that you repair or deduct it from the final selling price at closing.
Lastly, if you want to make a quick sale, you could offer your buyers a home warranty. It will give them peace of mind that the appliances and mechanicals in the property will be covered for the first year. Contrary to what most people think, a homeowner’s insurance policy does not include these items.
Setting aside 2% of your asking price for these expenses should be enough.
Moving Costs
Have you been living in the property that you are now selling? If so, then you also need to account for the expenses involving your relocation. Even if you are not hiring a moving company, you will still have to spend on moving costs. It includes boxes, packing supplies, a moving truck, a storage unit, and hired help.
Generally, you can expect to spend up to 2% of your selling price on these tasks.
How to Calculate Closing Costs in TN?
The total seller’s closing costs in Tennessee will vary based on different factors. You need to consider your home’s value, local fees, and buyer negotiations. It lets you calculate the exact closing costs when selling your Tennessee property.
Once you have some ballpoint estimates for the costs, you may use an online closing cost calculator TN to help you determine how much you need to prepare. Keep in mind that calculating the total closing costs in TN can be challenging if you don’t have all the information you need.
When calculating the seller’s closing costs in Tennessee, it’s better to overestimate than be short on funds. It’s also recommended to study the comparable properties that were recently sold in your area. Check the average closing costs for the price of the house—this will give you a good estimate of how much you need to prepare.
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How to Find Comparable Properties?
The best way to find comparable properties is by using Mashvisor’s real estate analytics tools. You can type the city where your property is, then click on the Map Search tool. From there, you can set the filters to match the features of your property. Here are the custom filters that you can adjust:
- Number of bedrooms
- Number of bathrooms
- Year built
- Square feet
- Property Type
- Status (select for sale or sold)
- Neighborhood
Then you will see a list of properties that match your custom filters. Find a property closest to yours, then click on it to see its details. You can use the Airbnb investment calculator tool built into the system to see the estimated expenses. You can use these estimates to help you determine how much you will need to prepare for closing costs.
Are you interested to know how Mashvisor works? Start your 7-day free trial today to find out.
You need to find the right property that matches your investment goals and needs more than knowing the closing costs in Tennessee. Mashvisor’s Property Finder lets you narrow your search using helpful filters.
Calculating Your Bottom Line
Estimating all the costs you will spend when selling your home is essential. It helps you know how much money you will have left at closing. To do this, just add up how much are the closing costs in TN plus other expenses related to selling your home.
Then, subtract these costs from your selling price. You will also have to deduct the amount that you may still owe on your mortgage. The result is called the seller’s net. It refers to the amount you will get after selling the house.
Here is a sample calculation:
- Total home selling price: $200,000
- Deduct the following:
- Closing costs (1.5%): $3,000
- Cleaning and repairs (3%): $6,000
- Real estate agent commission fees (6%): $12,000
- Negotiable items (2%): $4,000
- Mortgage payoff: $0
- Seller’s net: $172,000
When calculating costs, it is better to use the higher end of each range. As a result, you won’t end up underestimating how much you will be spending.
How to Save on Closing Costs as a Seller in TN
Closing costs are a standard part of selling a home in Tennessee. As a seller, it’s crucial to be financially prepared, so you won’t have to encounter unpleasant surprises. It’s also recommended to find ways to reduce your overall costs to maximize your profit.
Here are a few ways to save on closing costs as a seller in Tennessee:
Compare Fees From Different Service Providers
When selling a home, it’s best to shop around and compare prices from different service providers. It allows you to find the one that offers the most cost-effective package where you can save the most. Find closing services and title companies that offer lower rates for the same level of quality that you are looking for.
Negotiate With the Buyer
If you’re in a seller’s market, it’s easy to negotiate with the buyer to pay for the closing fees. It is more possible if you receive several offers and buyers are competing for your property. This is one of the reasons why it’s best to sell your property during a seller’s market.
Related: 10 Best Real Estate Negotiation Tips for Sellers
Find an Agent With Low Listing Fees
Agents’ fees are one of the most expensive fees that you need to pay. So make sure to shop around to find the lowest agent fees available. You may also opt to sell your home without an agent using the FSBO strategy. It allows you to save big time on the seller’s closing costs.
You Have to Spend on Your Home to Sell It
To summarize, closing costs are what you and the buyer will pay on top of the property’s price to complete the sale. Closing costs in Tennessee start at 1.5% of the selling price. This amount can go higher depending on your location.
These costs cover the expenses needed to finalize the transaction. It includes title search and transfer, owner’s title insurance, recording fees and tax, and property taxes.
But depending on your home, you may also have to pay other closing costs. Prepare for HOA transfer fees, attorney fees, property appraisal, mortgage payoff, and pest inspection. Aside from closing costs, you will also have to account for other expenses related to selling your home.
If you want to know how much you will take home, just subtract all these costs from the selling price. Should you find these expenses too high, you can find ways to save on closing costs and other expenses.
When you are ready to sell your home, you can list your property on a platform like Mashvisor’s Property Marketplace. This platform allows you to reach thousands of serious home buyers. Plus, you can also use its features to do your comparative market analysis. It helps you set the right selling price for your home.
Schedule a demo today to learn more about Mashvsior and its features.