When it comes to selling a house in Minnesota, there are several things to factor into the process. And besides listing costs, there are other expenses to be aware of too. Closing costs are one that many sellers tend to overlook, but that can affect how much you make from your home’s sale. Combine that with other hidden costs, and selling a house can quickly add up and not in your favor. To not be caught off guard by the reduced amount you walk away with, you’ll want to learn what closing costs you can expect to pay and how much they’ll cost when selling your Minnesota property. To help guide you and prepare you for what to expect when it’s time to close on your house, below we’ll cover everything you need to know about Minnesota closing costs.
What are Closing Costs?
To start, it’d be helpful to know what are closing costs anyway? Well, the closing itself is the last phase of the selling process, all documents are finalized, and ownership of your property is officially transferred to the next homeowner. The closing process is usually overseen by a third-party representative from an escrow or title company, and their job is to ensure all payments and paperwork are handled correctly.
Their services and documentation needed to close aren’t free, both the buyer and yourself will be responsible for paying an assortment of fees known as closing costs.
As the homeowner selling the home, you can expect your closing costs to mainly cover the home transfer expenses. In contrast, the buyer’s closing cost obligations are mostly related to lender fees.
The sellers closing costs typically equate to 1-3% of the sales price. The buyers usually cost more, adding up to 3-4%.
Fortunately, you can reduce your closing costs by working with a cash home buyer, an investor that will buy your house quickly and as-is- without agent commissions or service fees. And when it comes to closing costs those are negotiable.
What are the Closing Costs in Minnesota?
Minnesota closing costs can typically add up to 7% of the sales price. As the homeowner/seller, you can anticipate paying anywhere between 1% to 3% in closing costs. On the other hand, the buyer usually gets the bulk of the closing costs, spending close to 3% to 4%.
But don’t get too excited about paying less. While your closing costs are lower than the buyer’s, you’ll still need to pay commission fees at closing, which can cost an additional 6%.
How to Estimate Your Closing Costs in Minnesota
To be prepared, you’ll want to know how much you should expect to pay in closing costs. The formula is relatively straightforward: multiply your listing price by the closing cost percentage (1% to 3%).
Here is an example of the formula. The median sales price of Minneapolis homes is $300,000 as of February 2021. The closing costs would range anywhere from $3,000 to $9,000 for most Minneapolis homeowners using this sales price.
Furthermore, if you have agents involved, you’ll need to calculate their commission and be prepared to pay that too. Assuming that would be a 6% commission rate, you’re looking at paying an additional $18,000.
Minnesota Closing Cost Inclusions
Traditionally, you and the buyer each pay for specific closing costs, like most things in real estate, who pays what is negotiable. So if the buyer asks you to cover a portion of their closing costs, it’s helpful to be familiar with all the closing costs in real estate transactions.
|Title Search||$300||The buyer’s lender will request a title search to verify the title is clear. This search confirms you’re the home’s true owner, and there are no liens or issues with the property.|
|Title Insurance||$1,000||Title Insurance protects the buyer and their lender from any future financial loss due to unexpected home title issues.|
|Housing Inspection||$286 to $383||Before closing, the buyer usually requests an inspection to determine any major issues with the home.|
|Appraisal||$338 to $386||The buyer’s lender will require an appraisal to verify the property’s worth and value.|
|Survey||$450||A survey determines the house’s boundaries and building location.|
|Credit Report||$25||This fee covers the charge for a lender to pull the buyer’s credit history.|
|Loan Payoff Costs||0.5% to 1.5% of the sales price||Loan payoff costs have to do with fees associated with the buyer’s loan, including application fees, loan origination fees, and prepaid interest.|
|Mortgage Payoff/Prepayment Penalty||Cost varies depending on your lender||You may be charged a penalty if you pay off your loan before the end of your mortgage term.|
|Outstanding Amounts Owed on the Property||Cost varies||Any outstanding payments you’ll be responsible for including prorated property taxes, unpaid HOA dues, utility bills, and homeowners insurance.|
|Transfer Taxes||0.33% of the net consideration||The state issues transfer taxes to transfer the deed of your home to the buyer. In MI, you pay 0.33% of the price of the house (net consideration). Furthermore, if you live in Ramsey or Hennepin counties, you’ll be charged an extra 0.01% for an Environmental Response Fund (ERF) tax.|
|Recording Fees||Cost varies by county||Registering the sale and transferring your house will cost a fee and be part of the public record. Cost varies by county.|
|Settlement Fees||$2 per $1,000 in sales price||Minnesota law doesn’t require an attorney present at closing, however, you will still need a representative from a title and escrow company to oversee the closing process. The settlement fee pays for the services provided by the title company on closing day.|
Other Costs to Consider when Selling a House in Minnesota
For many homeowners, the cost to sell their property is more expensive than they initially thought. Closing costs are not the only expense to account for when selling a house. Another considerable expense you’ll want to factor in is home improvements and repair costs.
Fingers crossed, the inspection only finds minor issues, like tightening a door handle or changing out your air filters. But if more serious problems surface like termite damage, a leaky roof, foundation issues, or water damage, your repair costs or seller concessions may add up quickly.
Something else to budget for is preparation costs before you put your house on the market. You’ll want to set aside money to prep and stage your property, as well as spruce up the landscaping or storage expenses.
And don’t forget commissions. Typically the seller is responsible for both the agent’s commission and the buyer’s agent’s commissions too. As mentioned above, the standard commission rate in Minnesota is 6% of the sales price. So you’re looking at several thousand dollars in commission alone besides what you’ll have to pay in closing costs.
→ Find out how to sell your house in Minneapolis without sinking any more money into it, by clicking here.
Who Pays Closing Costs in Minnesota?
To give you a better idea of who pays what, here is an overview of what the seller usually pays and what the buyer usually pays when it comes to closing costs.
Seller Closing Costs
The seller’s 1% to 3% closing costs usually cover any expenses involving the transfer of ownership along with any outstanding payments on the property. Below are the Minnesota closing costs you can expect to cover as the seller:
- Title insurance for the buyer
- Mortgage payoff and any penalties for early payoff
- Transfer fees
- Attorney fees
- Escrow fees
- Recording fees
- HOA fees, property taxes, and utilities
Buyer Closing Costs
The buyer pays more in closing costs, ranging from 3% to 4%, and are typically related to the lender and loan fees. Below are the Minnesota closing costs you can expect the buyer to pay:
- Home Inspection
- Title search fee
- Lender’s title insurance
- Appraisal fee
- Survey fee
- Credit report fee
- Origination fee
- Underwriting fee
- Settlement/escrow fees
- Recording fees
- Prepaid interest
→ On the fence about selling your house right now? Here are 5 reasons why you should consider selling your house right away in Minneapolis.
Pros and Cons of Paying Closing Costs in Minnesota
Unfortunately, closing costs are one of those inevitable expenses that you probably can’t avoid when it comes to selling a house. However, there are some pros and cons of paying closing costs in Minnesota.
Pros of Paying Closing Costs
- Offering to pay the buyer’s closing costs may help your home sale go through.
- Paying the buyer’s closing costs can be used as an advantage when selling during a buyer’s market.
- A buyer may pick your house over another because you’re willing to help with closing costs.
Cons of Paying Closing Costs
- It’s an extra expense that affects the amount you walk away with.
- You already have to pay for repairs, staging, and real estate commissions.
- Offering to pay closing costs doesn’t guarantee a fast home sale.
Selling a house is surprisingly not cheap. Between getting the house ready to list by prepping, staging, making repairs, adding curb appeal and improvements, and paying agent commissions and closing costs, the expense to sell your house can add up quickly.
To help, it’s good to be aware of these extra expenses and budget accordingly. However, if you’re hoping to keep costs down, Mill City Home Buyers can help! Mill City Home Buyers has an easy home buying process that doesn’t include hefty realtor fees and service charges.
Closing costs are negotiable, and repairs, improvements, and staging aren’t necessary. This alone is a savings of several thousand dollars.
They also can make you an offer on your house within 24-hours and close in as little as 7-days. Making this process not only less expensive but fast too.
To get in touch with Mill City Home Buyers, feel free to contact them at (612) 260-5577 or visit their website for more details.