Who Pays Closing Costs When Selling a House By Owner?

Published on June 23rd, 2023
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Taryn Tacher Senior Editor
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Taryn Tacher Senior Editor

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Taryn Tacher is the senior editorial operations manager and senior editor for HomeLight's Resource Centers. With eight years of editorial and operations experience, she previously managed editorial operations at Contently and content partnerships at Conde Nast. Taryn holds a bachelor's from the University of Florida College of Journalism, and she's written for GQ, Teen Vogue, Glamour, Allure, and Variety.

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At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.

When you sell your house without the help of a real estate agent, you’ll save money on commission fees but won’t escape closing costs entirely. The same closing fees that apply to an agent-assisted sale will be charged to a FSBO seller, with the exception of the agent commission. If a buyer uses an agent, a seller may also be asked to pay all or part of the buyer’s agent commission.

Who pays closing costs when selling a house depends on what’s custom for the location where the property is sold as well as how negotiations unfold. Let’s say a buyer has a strong advocate as an agent while the seller has no representation — in that event, the seller could end up shouldering a larger portion of closing costs than they expected to.

Buyer’s agent fee (~3%)

Sellers often choose to sell FSBO to avoid paying a commission or fee. Commission fees average 5.8% of the sale price (for simplicity, let’s round up to 6%) covered by the seller in the majority of home sales. For reference, on a $250,000 home sale, that amounts to $15,000 in commission fees. This fee is usually split 50/50 between the listing agent and buyer’s agent in a transaction.

When FSBO buyer is known

A higher proportion of FSBO sales tend to be between buyers and sellers who already know each other. As of 2022, 50% of FSBO sellers knew their buyer.

In these types of sales, typically what happens is the buyer and seller each hire an attorney to hammer out the paperwork and close without involving real estate agents on either side. It’s possible in that case to save all 6% of the real estate agent commission fee.

When you need to find a buyer

If you aren’t one of those FSBO sellers who already knows their buyer, you may wonder if you should still offer to pay the standard buyer’s agent commission of 3% in order to get buyers in the door.

Whether you choose to offer a commission to a buyer’s agent or intend to work with an unrepresented buyer is up to you as a seller. However, refusing to pay the fee could limit your buyer pool.

Why buyer’s agents want a fee

Buyer’s agents will expect compensation for the work they do to bring a buyer to a sale, such as arrange showings and help to tee up and qualify the buyer. And it’s typical for sellers to pay that fee within the current real estate market. Plus, when a seller isn’t working with an agent, the buyer’s agent may end up carrying more of the weight to get the deal to the finish line.

Your options are to offer the 3% commission to a buyer’s agent (you’d still be saving on the 3% listing agent commission) or whatever percentage is normal for your market, negotiate a flat fee or reduced buyer’s agent commission rate, or offer no buyer’s agent commission. On the third option, you’d save the most on commission, but finding a buyer may take longer.

“One major advantage of having an agent is finding a buyer,” shares James R. Rhyne Jr, a real estate attorney at Butler & College in Mount Pleasant, South Carolina who handles one or more FSBO transactions per month. “You can hire an attorney to help you with the contract — but I can’t help you list your property. Most of the FSBOs who come to me already have a buyer.”

Seller FSBO closing costs

Other than the buyer’s agent commission, sellers in a FSBO transaction should expect to pay for:

Pre-listing appraisal ($400-$600): It’s not required, but without access to an agent’s comparative market analysis, a FSBO may find it useful to order their own pre-listing appraisal for the purposes of pricing the home accurately.

Seller’s attorney fees ($150-$350 an hour): Not all states require sellers to hire a real estate attorney, but FSBO sales warrant legal and professional oversight of some kind to avoid an abundance of legal risk. An attorney will review and prepare key documents and make sure paperwork is filled out properly, such as the seller’s disclosures.

Transfer taxes (0.1%-2.2%): Many states and municipalities levy taxes for the transfer of property from one party to another. Currently, 13 states do not charge any transfer taxes, while these taxes can surge up to 3%-4% for homes over a million dollars in some states. Oftentimes this fee falls on the seller, but customs can vary by state.

Property survey fees ($380-$540): Unless you already have an up-to-date copy, you may need to pay a surveyor to create a land or property survey serving as a legal document of the topography and boundaries of your entire property as part of the record of the sale.

Buyer FSBO closing costs

A buyer will also have their share of closing costs to pay when they purchase a home listed as FSBO.

Loan origination and processing fees (1%-3% of the loan amount): Lenders charge these fees for the preparation and evaluation of the buyer’s mortgage.

Buyer’s attorney fees ($150-$350 an hour): A buyer will need their own advisor, especially if they are unrepresented by an agent, to acquire, review, and sign the necessary documents to buy a home without assuming legal risk.

Third-party appraisal ($400-$600): If the buyer is using a mortgage to purchase the home, the lender will require a third-party appraisal to confirm the home’s fair market value and determine what they’re willing to lend.

General and specialized inspections ($350 for general, $100 for special): Most buyers opt to hire a professional inspector to look under the hood of a home before they cement their purchase. A general inspection checks for big issues related to the home’s foundation, plumbing, electrical, HVAC, roof, and other main systems, while specialized inspections may check for termites or radon.

Negotiated or split fees

Some fees may be negotiated or split between buyer and seller in a FSBO transaction. A few examples include:

Seller concessions and closing cost credits (varies): A buyer may ask you to pay for certain concessions, such as cash to offset certain repairs, home warranty coverage, or a portion of their closing costs. Without an agent on your side to reject requests or negotiate on your behalf, these concessions can become fairly steep.

Settlement fees (1%): The title company, escrow company, or attorney that facilitates the closing will also charge what are called settlement or escrow fees for handling the final paperwork and distributing funds to the appropriate parties.

The settlement fees are generally divided between the buyer and seller depending on what the purpose of the specific settlement fee is and what is customary in the market where the property is located, but who pays these fees can be up for negotiation in many instances.

Property taxes (varies): Regardless of whether they’re listing FSBO, a seller will need to settle up on any property taxes owed during their time owning the home up until the date of closing, and a buyer will be responsible for taxes that start accruing after the closing date. This may involve prorating the taxes owed to a daily rate so the charges can be split accurately.

Title fees (1%)
A number of title fees will likely be charged in any real estate sale, including:

Title search ($75-$200): A title search prior to closing looks through various records to surface any claims against a property that would prevent it from selling free and clear.
Owner’s title policy (0.5%-1%): Let’s say after purchasing your home, a long-lost family member comes to your buyer with a valid claim against the property that wasn’t caught by the title search. Title insurance provides protection against these rare but sometimes costly mistakes, and it’s not unusual for a seller to cover a one-time payment for the owner’s policy.
Lender’s title policy (0.5%-1%): This insurance provides coverage for the lender in the event that a title defect is discovered, but only up to the value of the loan amount. It’s common for buyers to cover this fee.

Can a FSBO seller refuse to pay closing costs?

Hypothetically a FSBO seller could ask a buyer to cover all their closing costs in addition to buying the home. But you’re not likely to find a buyer who’s willing to agree to those terms. As with any listing, a buyer is going to approach the situation looking to secure the best deal.

“In theory, the seller can make the buyer pay all the closing costs — but why would a buyer agree to that?” explains Rhyner. “I doubt most people are going to read a one-sided contact and not notice. Rather, sellers have their own fees and buyers have their own fees with most contracts.”

Without an agent to negotiate in your favor, the contract could skew more buyer-friendly in the end.

“If I am the buyer’s agent and the seller is selling on their own, I am writing that contract pro-buyer,” shares top Dallas real estate agent Rach Potter. “My responsibility is to my buyer, so if I can get things taken care of for the buyer, I will.”

FSBO closing costs example

Bob and Mary sell FSBO

For example’s sake, let’s say that fictional Bob and Mary decide to list their Savannah, Georgia, home For Sale By Owner. They aren’t sure how to price the home but after checking a few of their neighbors’ property values online, they pick an asking price of $200,000.

They use iPhone photos rather than a professional photographer and don’t stage the home. After only having a few tire-kickers express interest for several weeks, they decide to add a note indicating they’re willing to pay a buyer’s agent commission of 2.5%.

A buyer’s agent representing a buyer named Sally brings Bob and Mary a bona fide offer of $190,000, finally! The agent then negotiates that Bob and Mary reduce the price by $10,000 after the inspector discovers some serious safety issues with the property. She also asks Bob and Mary to provide a closing cost credit to Sally amounting to $3,000.

That brings their price down to $180,000. From there, they need to subtract:

attorney fees ($500)
closing cost credit ($3,000)
buyer’s agent commission ($4,500)
outstanding mortgage balance ($50,000)
title fees ($1,770)
property taxes owed ($1,000)
settlement fees ($885)

After accounting for these closing costs, Bob and Mary see selling proceeds of around $118,000 and a time on market of eight weeks.

Could Bob and Mary have netted more with a real estate agent’s help? Maybe. The data says, in fact, it’s likely they would have.

According to the National Association of Realtors, agent-assisted sales sell for significantly more on average than FSBO sales. Our transaction data at HomeLight further echoes that real estate agents who are top of their market sell homes for as much as 10% more than the average agent.

A great real estate agent can help a seller achieve a higher price with advice on impactful pre-listing improvements, targeted pricing (often without the costs of pre-listing appraisal), and negotiations through closing in effort to reduce their selling costs.

A real estate agent also puts some of their commission dollars toward staging and marketing the home so that it sells faster and for more, a service Bob and Mary did not receive by going FSBO.

Bob and Mary hire a top agent

So let’s say Bob and Mary take a different path and decide to list with a top real estate agent.

After reviewing their agent’s CMA, they learn that they could actually list their home for $20,000 more if they made some light improvements to enhance curb appeal, deep clean, and declutter, among a few other low-lift projects.

An agent also informs them that they were underselling their value and can list for more due to being in a great school district as millennial buyers flock the area.

An agent takes professional photos and by making sure the post appears on all the major real estate sites plus social media, attracts one or more buyers right away. The agent negotiates $5,000 after the inspection rather than $10,000 knowing that the buyer’s agent is swinging for the moon based on local area repair costs.

She also rejects the buyer’s request for a closing cost credit, noting that the price and terms of the original offer were more than generous to the buyer. Bob and Mary are also able to skip hiring a separate attorney.

The offer might look more like $180,000 $215,000 after inspection, with additional closing costs like so:

closing cost credit ($3,000)
attorney fees ($500)
real estate agent commission ($12,900)
outstanding mortgage balance ($50,000)
title fees ($1,770)
property taxes owed ($1,000)
settlement fees ($885)

In this scenario, Bob and Mary walk away with more like $148,000. As a bonus, they were able to sell a bit faster than the market clip by securing an offer in two week’s time.

FSBO closing costs summary

Now you know, the only way to avoid paying the 6% agent commission is for the seller and buyer to come to the sale unrepresented and pay an attorney to handle the paperwork.

Let’s review other key points to remember:

In a FSBO sale, additional closing fees for attorney hours, transfer taxes, and settlement fees and more will still be deducted from your proceeds, amounting to around 1%-4% of the sale price.
If a buyer uses an agent, sellers may also be asked to pay all or part of the buyer’s agent commission, bringing total seller FSBO closing costs to approximately 4%-7%.
Buyers will often pay their own closing costs averaging 2%-5% of the final purchase price with a good portion of those expenses going toward their mortgage fees.
Elimination of the listing agent commission amounts to a savings of usually around 3%. However, home sales data shows that selling without an agent could result in a lower sale price, a risk sellers should weigh in their decision to go FSBO.
FSBO puts all the work on the seller to list the home and negotiate the contract. An attorney can fill in some gaps but can’t totally replicate the services of an agent.

If the prospect of FSBO seems overwhelming, HomeLight would be happy to introduce you to some quality real estate agents in your area for a consultation as a next step.

Header Image Source: (Sean Locke Photography / Shutterstock)

Taryn Tacher

Senior Editor

Taryn Tacher is the senior editorial operations manager and senior editor for HomeLight's Resource Centers. With eight years of editorial and operations experience, she previously managed editorial operations at Contently and content partnerships at Conde Nast. Taryn holds a bachelor's from the University of Florida College of Journalism, and she's written for GQ, Teen Vogue, Glamour, Allure, and Variety.