What You Need to Know About Closing Costs for Home Sellers

Understanding Closing Costs When Selling Your Home

Selling a home is exciting, but it comes with expenses that can catch you off guard. Imagine this: you’re at the closing table, expecting to walk away with a solid profit, only to see thousands of dollars deducted from your proceeds. That’s the reality of closing costs, and if you don’t prepare for them, they can take a big bite out of what you think your earnings might be.

In this post, we’ll break down the costs sellers typically pay, why they exist, and how to keep more of your money when selling your home.

What Are Closing Costs?

Closing costs are the final expenses you pay to complete the sale of your home. They cover everything from the real estate commission to the title transfer tax and your legal fee. Depending on the sale price of your home and the immigration status of the buyer, typically a seller may pay 11.35% to 14.35% of the home’s sale price in closing costs.

Understanding these costs ahead of time can help you budget properly and avoid last-minute surprises.

The Closing Costs for Home Sellers

1. Real Estate Agent Commission

Real estate commissions remain a key expense for many sellers. Unlike home sales in the US, sellers of homes in the Bahamas still pay the listing agent a full commission out of which the listing agent will pay the sub-agent commission.

• How much do commissions cost?
  

  • Traditionally, the commission rate in The Bahamas on the sale of a house (i.e. developed property) is 6% of the sale price. 

• Who pays the commission?
  

  • The Bahamas industry standard remains that sellers still pay their listing agent the full commission.

If you’re wondering whether an agent is worth the cost, consider their role in getting top dollar for your home. A great agent often makes up for their commission by negotiating the highest possible sale price.

As the real estate commission is a service and subject to VAT, VAT is charged on the real estate commission at the rate of 10%. 

2. Transfer Tax

The Bahamas charges a Value Added Tax on the legal transfer of ownership of your home to a buyer.

• How much does the transfer tax cost?

  • If the buyer's immigration status is either a Bahamian citizen or a Permanent Resident (with the right to work in The Bahamas) then the transfer tax is determined using a scale based on the value of the house. The transfer tax can range from 2.5% to 10%.

  • If the buyer's immigration status is not Bahamian or a Permanent Resident (with the right to work in The Bahamas), then the transfer tax is 10% of the sale price of the home regardless of the value.

• Who pays the transfer tax?
  

  • In The Bahamas, the transfer tax is typically split equally between the buyer and the seller.

3. Prorated Property Taxes

Because property taxes are paid annually, you’ll need to pay your share up until the closing date.

• How is it calculated?

  • The total property tax bill is split based on the number of days you owned the home that year.

• Example: If property taxes are $6,000 per year and you sell halfway through the year, you owe $3,000 in prorated taxes.

4. Prorated Homeowners Association (HOA) Fees

If your home is in an HOA, then like your annual property tax you will pay your share up until the closing date.

5. Attorney Fee

In The Bahamas, you must hire a real estate attorney to convey the title of your property to the buyer. The Bahamas Bar Council fee schedule is a scale depending on the sale price of the property and can range from 2.5% to 1.5%. As the attorney fee is a service and subject to VAT, VAT is charged on the legal fee at the rate of 10%. 

Preparing for Closing

As you approach the finish line of your home sale, there are still a few final steps to take before closing day. Proper preparation can help avoid last-minute surprises and ensure everything goes smoothly. Here’s what you need to do before handing over the keys.

1. Review the Completion Statement Early

• You’ll get a draft copy of the Completion Statement a few days before closing that lists all costs.

• Review it carefully to catch any unexpected charges.

2. Finalize Paperwork

• Make sure any liens, HOA fees, and taxes are paid to avoid delays.

Final Thoughts

Selling a home is more than just finding a buyer. Closing costs can add up, but hiring an experienced Morley agent will carefully calculate your expected proceeds of sale, and will help you understand what to expect and plan ahead.