Can You Avoid Closing Costs? Tips to Reduce Them

Negotiate a lower agent commission

Frey wants sellers to know that everything is negotiable, including your agent’s fee.

“You’re trying to make your client happy, and you’re trying to make it work,” Frey comments. “So, if that’s something where you’re trying to make it work and financially it’s something that can be a win-win for both sides, then that’s something that could be negotiated.”

However, there’s real value to the work that agents do, so don’t think that your agent is going to jump at the chance to slash their commission too much.

Some agents also advertise themselves as “low commission agents,” meaning they charge a much lower commission than their peers, usually in the 2% range. However, working with such an agent can be a much different experience than working with a top agent. Frey comments that some agents in this category only seem to put their clients’ homes for sale on the multiple listing service (MLS), without doing much marketing work. So be sure to do your research before signing any contracts.

Or, work with a top real estate agent

Getting more money for your home can help offset your closing costs. HomeLight’s data shows that the country’s top 5% of real estate agents sell homes for as much as 10% more than the average real estate agent.

To find a top agent in your area, consider using HomeLight. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you. Our service is 100% free, with no catch. Agents don’t pay us to be listed, so you get the best match.

Prioritize agent-recommended repairs

Another way to get the most money for your house is to freshen it up and add value. Your real estate agent can recommend repairs and updates that are worth your while and have a reasonable return on investment based on what buyers in your area want. A higher price can help to cover any necessary closing costs and selling expenses that will be deducted at closing.

However, keep in mind that some costs are calculated as a percentage of property value. In those cases, the more your house sells for, the more you pay — but certain updates can still be well worth it.

Price competitively

On the other hand, if you price your house competitively in a seller’s market — meaning less than a similar house in the area might go for — a buyer may recognize that they’ve struck a good deal on price and be less likely to request assistance with their closing closets.

Which closing costs can buyers and sellers negotiate?

While buyers and sellers each have specific closing costs they customarily cover, there are a few that buyers and sellers often negotiate.

If your area is currently experiencing a seller’s market, buyers are more likely to take on some of these closing costs to help entice their offer to the seller. On the flip side, in a buyer’s market, sellers are more likely to pay these negotiable costs to help entice the buyer.

Still, Frey says she sees some sellers not bothering to ask buyers to pay for negotiable closing costs because they’re already getting more out of the transaction than they thought they would.

“It’s not like a do or die thing,” she explains. “They go, ‘Well I mean, I’m getting this much, am I really gonna fight for another $800 or $1,200?’ when they got a lot more than they were anticipating.”

Here are a few of the closing costs that are negotiable or split between buyers and sellers:

Settlement fees

Depending on where you live, you may use a title company, escrow company, or real estate attorney to close your deal and handle all the final paperwork. Because this closing agent is impartial to both parties, typically both the buyer and the seller pay their fee. In some areas, it may be customary for either the buyer and the seller to pay them in full. However, you can negotiate who pays for these fees.

Title fees

Title fees cover insurance policies that protect the buyer and the seller in case an issue arises with the title after the home is purchased. While it’s often customary for the seller to cover the new owner’s title policy and the buyer to cover their lender’s policy, norms vary depending on the location where the property is located, and these fees can sometimes be negotiated between parties.

Property taxes

Property taxes are typically prorated for both buyer and seller. For example, if the seller moves out in June, they may have to pay the property taxes from January to June. The new owner will be responsible for taxes from July to December.

Whether the money changes hands between the buyer and the seller at closing or directly to the state and county depends on if your area pays for taxes in arrears or upfront. It’s typical for both the buyer and seller to pay just what they owe, but once again, the cost may be negotiable in many instances.

Home warranty

Sellers may offer home warranties to buyers to help cover anything that might go awry with the house during their first year of occupation. Typically, warranties are used in a case where the buyer is concerned with an aging factor of the house.

However, a buyer may choose to purchase this policy themselves, depending on factors such as the state of the house and what the seller is willing to give.

Reducing closing costs is possible

Many aspects of a real estate transaction are up for negotiation, and there are often ways to save money during your home purchase or sale — it’s just a question of how. To cut down on closing costs, consider these strategies, whether you’re buying or selling.

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