This article is written by the folks here at Blake Buys Homes, a real estate investing company that focuses primarily on buying houses and apartments in Southern California, directly from sellers (real estate agents not involved). We have compiled internal data from hundreds of transactions and checked and cross-checked the figures below to make sure we have an all-encompassing and accurate list of the most of the common costs a seller faces when selling a home or rental property in Southern California. These article not only includes standard closing costs, but other costs that are often overlooked by sellers.

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Bare with us for a second while we make our pitch: If a property fits our buying criteria, we are willing to look at any of the options or strategies in this article on a case by case basis with an seller. When working with us, seller’s don’t pay any commissions, fees, transfer taxes, etc. - we pay all of the closing costs. We can close on a day of the seller’s choosing, and if desired, in as little as 5 days from an accepted offer. We buy properties 100% as-is and never ask the seller to make any repairs or improvements. We even buy properties with rooms full of leftover items that seller’s don’t want to deal with. If a seller has other wants or needs, we do what we can to help, regardless of the situation. If your property fits our buying criteria, we can have a no-obligation offer for you in 48 hours. To get started just fill out the short form on the right hand side of this page and we’ll get back to you shortly. Feel free to take a look around our site to learn more. We’d love to hear from you!

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Below is a list covering the typical closing costs that show up on the seller’s closing statement along with a handful that don’t, but take dollars out of a seller’s pocket just the same. When all is said and done, the costs below typically add up to 7.5% to 10% of the sales price. We cover each item in more detail throughout the article.

Closing Costs and Other Costs To a Seller in a Typical Transaction

1. Commissions

2. Escrow Fees

3. Title Insurance

4. Termite Inspection

5. Addressing Items that Show Up On Buyer Inspection Reports

6. Home Warranty

7. Documentary Transfer Taxes

8. Natural Hazard Disclosure

9. HOA Related Fees (If Applicable)

10. Pre-Sale Repairs and Upgrades Recommended by Agents

11. Holding Costs

12. Other Items that Impact a Sellers Net, But Aren’t “Costs” Incurred

13. Miscellaneous Location-Specific Items

14. Your Time

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In Southern California, the real estate commissions for both the listing agent and selling agent are paid by the Seller. Although slightly counterintuitive, the “selling agent” is the agent representing the buyer. The commission amount is typically based on a percentage of the sales price and is commonly 5% to 6%, however, this figure varies slightly based on price range and location. Typically, the commission is split 50/50 between both agents (commissions are actually paid to the employing brokers with a net amount paid out to the agent after the brokerage company takes it’s cut).

Example: An agent and seller agree on a 6% commission to sell a home listed at $500,000. Assuming the home sells for the list price, and that another agent is representing the buyer, the total commissions paid by the seller will be $30,000 ($500,000 x .06). $15,000 will be paid to each broker.

Some listing agents will offer to list a property with a reduced commission if they are able to find a buyer that they represent in the purchase. When this occurs, the listing agent becomes a “dual agent” and the fee may be reduced to 3% or 4%. Dual agency is rare in residential transactions.

Escrow Fees

In the majority of transactions in Southern California, sellers and buyers pay their respective escrow fees, most of which, are based on the purchase price. Like most professional services, the Escrow fees will vary depending on which company is selected.  As a rule of thumb, a base fee of $150 to $350 is charged regardless of the sales price, and an additional $1.50 to $3.25 per thousand dollars of the sale price is added.

In additional to the escrow fee, other miscellaneous fees include documentation fees ($50-$200), wire fees ($20 to $50), archive fees ($50 to $150), and fees for each loan that must be paid off prior to close of escrow ($40 to $70).

Title Insurance

The Seller will normally pay to provide the buyer with a CLTA Homeowners Title Insurance Policy for the protection of the new buyer to insure a clear title with no liens from individuals, companies, government entities or claims of ownership by others. This title policy will also provide information on any existing easements on the property. These are rights retained by others to enter onto your property, and usually relate to utility companies which may have sewer, phone or electrical lines running under the property. The title company will typically have exclusions to what they will insure against, some of which are negotiable, but the general intent is to insure the new seller against future, currently unknown claims that arise on title that may affect their interest.

The price of this title policy varies with the purchase price. The base policy fee is typically between $500 and $1,000 plus anywhere from .15% to .35% of the purchase price (if doing the math on a calculator multiply the selling price by .0015 or .0035). A sale price over $750,000 will likely be on the low end of this range. These costs are reduced by about 15% to 20% if a title policy has been issued to the seller within 5 years. Other miscellaneous charges include sub-escrow and wire fees, if the seller has an existing mortgage which typically cost between $100 and $250.

Termite Inspection

Most homes in Southern California have active wood eating pest infestations. An article by the L.A. Times reported 60% to 80% of homes are infested and 90% (!) of the inspections that show an infestation are the result of a home sale transaction.

In a typical sales contract in Southern California, a termite inspection and work needed to be performed for Termite clearance is the sellers’ responsibility. The inspection itself isn’t too pricey, usually between $100 and $300, however, the damage control and pest remediation can be quite costly. Some of the major costs that are common include: replacing major roof components, tenting the house, accessing and replacing major structural members, and removing and replacing drywall and roofing material after repairs have been made.

If a buyer is buying the property with a loan, almost all lenders will not fund a loan until they see a clear Termite report. What this means for sellers is: Even if you are selling a home “as-is”, most advisors will recommend the seller cover this cost.

Addressing Items that Show Up On Buyer Inspection Reports

Most purchase contracts used in Southern California have a clause that states the property is being sold “As-Is” regardless of what is discovered in these inspections. While this is an appealing concept for a seller when they enter first enter into a contract, what often happens, is a buyer hires an inspector whose job it is to find flaws...and they usually find many that come as a surprise to sellers.

The two most common inspections are general property inspections and termite inspections and more often than not, these reports reveal items that require immediate attention and cost a seller thousands of dollars to fix. These findings usually include items nearing the end of their useful life, broken items, or items that do not comply with current code. When lenders are involved, inspections are even more thorough, and if one of a wide range of common issues is found and it impacts habitability, even slightly, the property may be a no-go for that lender and other lenders.

In our experience, the findings on inspection reports usually come as a shock to a buyer and they panic. They conclude that they need to mitigate the bad news either by receiving a price reduction or having each and every item fixed. Most buyers and their advisors (agents, attorneys, family, etc.) will recommend the buyer get a credit from the seller for the cost to replace or repair these items, or force the seller to replace all of the items prior to completing the purchase. This is almost always a point of contention because not only does it cause major delays, but the costs to fix the problem quickly get out of hand and need to be done to everyone’s satisfaction. In cases where fixes are major, the city may have to get involved and major systems such as plumbing or electrical may have to be brought up to current codes and then inspected and approved by the city, which is yet another cause for delays of days, weeks, or months.

Home Warranty

A Home Warranty policy is typically good for one year and covers any necessary repairs for items such as heating and air conditioning systems, plumbing and electrical systems and appliances. This policy is not required to be purchased by a seller, however, most buyers expect them and most agents will advise their buyer-clients to request them from a seller. These warranties generally cost from $350-$800.

Documentary Transfer Taxes

In most areas of Southern California home Sellers pay all of the Transfer Taxes. County taxes are approximately $1.10 for $1,000 of the sales price. Transfer taxes at the city level vary widely and can greatly exceed County taxes.

Natural Hazard Disclosure

A  Natural Hazard Report  is a 3rd party report required in every home sale transaction. They typically cost between $100 and $150 and cover items that brokers and sellers are legally required to disclose if the property being sold lies within one or more state or locally mapped hazard areas. The law specifies that the six (6) required hazards be disclosed on a statutory form called the Natural Hazard Disclosure Statement (NHDS). Some of the required risks include: flood hazard area, high fire area, earthquake fault zones and Megan’s Law disclosures.

HOA Related Fees (If Applicable)

If the property is part of a Homeowners Association (HOA) there are almost always fees charged by the HOA for document preparation and work required to change records to reflect the new seller.  The seller is required to provide HOA documents for the buyer’s review, including the CC&Rs (Conditions, Covenants, and Restrictions), board meeting minutes, and articles of incorporation.  The HOA charges a document preparation fee to assemble this paperwork. When all is said and done, these items can cost a seller between $250 and $700.

Pre-Sale Repairs and Upgrades Recommended by Agents

Making some repairs and/or upgrades to a house prior to putting it on the market make sense from a financial standpoint. The work done to the property may attract more interested buyers and prospective buyers may pay an increased sales price that covers the cost. One could also make the argument (after the fact) that a certain upgrade was the reason a specific buyer paid what they did.

In our experience, before spending a dime on anything, a seller should do extensive research on recent sales in the area to determine the demographic of the most likely buyer for their property. Once they are somewhat confident in who will be buying the house, they can make an educated guess as to the what repairs or upgrades make sense, prior to marketing the house for sale.

Most buyers have very specific taste and they would prefer to their own products, paint colors and fixtures. Most buyers in today’s market also appreciate the opportunity to “make the house their own” by putting in some sweat equity.  Regardless of what a seller elects to do with the property, items that need attention will end up costing the seller in net proceeds, whether they do them or a new buyer pays less to compensate for their near-term out of pocket costs.

Holding Costs

It usually takes between 75 and 120 days for a house to sell, starting from the time a seller makes the decision to they want to get rid of it. Almost 40% of properties that go under contract with a buyer end up falling apart for one reason or another, which can add an additional 45 to 60 days to the holding period.

During this time, the seller continues to pay mortgage interest, property taxes, HOA dues (if applicable), insurance, the cost to run the utilities, etc. These costs are often overlook but end up being the second highest dollar amount, behind real estate commissions.

Other Items that Impact a Sellers Net, But Aren’t “Costs” Incurred

When a seller is trying to calculate their net proceeds when all is said and done there are a few major items that aren’t costs but are pre-existing financial obligations that are tied to the seller’s ownership and are typically paid off directly out of the escrow account using the buyers proceeds prior to close of escrow. That was a mouthful. Here are those items:

  • Outstanding Loans

  • Items for Lender being paid off including statement fees, reconveyance fees, and prepayment penalties (if applicable)

  • Other Liens (Voluntary or Involuntary)

  • Prorated Property Taxes

  • Prorated HOA Dues

Miscellaneous Location-Specific Items

Seemingly every year, new regulations and rules pop up that require a seller to get clearance from a certain governing body or environmental regulatory agency if their property is located in a certain area (possibly county, city or natural boundary). If an seller cannot get clearance, or a sign-off that a future seller will be safe from harm, they may be required to provide a buyer with insurance to cover the possibility of future loss.  For example, for houses in a “Flood Zone”, a seller may be required to get a Flood Certification which can cost close to $1,000 and based on the findings, may have to also pay for a buyer’s flood insurance policy. In Los Angeles County, a seller is required to pay for a Retrofit Certification, which ensures that certain items are installed properly to handle earthquakes. Like any other inspection, the results may lead to a seller paying thousands of dollars to comply with requirements.

Your Time

Yes, your time is a cost. How much? That is for you to decide, but you should expect to spend a minimum of 50 hours of your time to take part in a typical sale transactions. This number can increase quickly depending on how lucky you are finding the right buyer and how many weeks the property is on the market. Some of the most time-consuming tasks include: agent interviews, meetings to go over paperwork, property showings on weekends, visits to the escrow office, coordinating with inspectors and/or subcontractors to make repairs or improvements, etc.

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We hope you enjoyed this article! Did we miss anything? If so, let us know and we'll add it. Feel free to take a look around and if you have a property that you are considering selling, give us a call and we'll let you know how much we can offer within 24 hours. Our offers will eliminate all of the closing costs in this article other than holding costs, however, we'll drastically reduce those with our ability to close escrow in as few as seven days. We look forward to hearing from you!


The Dream on Duarte St. - Finding a Dream Solution for a Family's "Nightmare" House in Mission Viejo, Orange County

In late 2014, we were contacted by a family (husband, wife, five middle-aged children - each in their 40's and 50's with involved spouses), who owned a vacant 2,600 square foot 1970's house in Mission Viejo, California. The residence was formerly occupied by the elderly mother and father, both of whom, became unable to move around the two story house that was not designed for people with mobility restrictions. When the husband and wife moved out, the property was soon transferred into a trust that was owned by all of the children. A spouse of one of the children was appointed trustee and his goal, on behalf of the family, was to sell the property as quickly as possible for a fair price.

The family nicknamed the house "The Nightmare on Duarte" due to a laundry list of problems they had been having with it over the past year - to list a few: past due on HOA payments and corresponding liens on the property, cracked slab, other foundation issues to due property location on a hill, slab leaks in two places, stained carpets, broken roof tiles and excessive dry rot and termite damage.

The family spent a few weekends interviewing real estate agents, who each had something different to say about recommendations prior to listing the property for sale. The majority of likely buyers would need a loan to buy the property and lenders would refuse to lend with major foundation, structural and safety issues. The family didn't have the expertise to do the repairs themselves and money was too tight to invest the needed amounts into hiring subcontractors to fix the problems. Each day that they had to hold onto the property, the past due balances and penalties grew and they were still facing a 2 to 3 month period to market the property and get it sold. 

Fortunately, a friend of the trustee provided the owners with our contact information and explained that we specialize in buying houses fast, all-cash, which allows us to bypass any financing issues due to the condition of the house. After getting more information from our website, the trustees gave us a call and we made arrangements to meet at the property. We did a walk-through and determined that none of the problems were insurmountable. A day later we sent them our written offer to buy the property as-is, and the family and trustee accepted that same day. We closed escrow seven days after the Purchase Agreement was signed.

Prior to learning about our company, the family thought the only solution was to enlist the help of a real estate agent and hope that buyers didn't discount the pricing beyond what was fair.  Based on what real estate agents told the family the house was worth, and after deducting the costs of selling including the 6% sales commission, the family was very happy with our offer and terms - we even paid all of the closing costs...another win/win solution for everyone involved.

If you have a property that you are considering selling a house or apartment property fast and you would like to go over some creative ways we could structure a sale, feel free to give us a call to talk about options. With Blake Buys Homes, homeowners pay no commissions and no fees. Visit our home page to learn more about our buying process and the benefits to homeowners that are considering selling their property.

The renovations shown in our pictures are the product of the Blake Buys Homes Construction Team (BBH Construction), which is comprised of the most high-integrity and hard-working subcontractors in Southern California. If you are looking for help renovating, fixing or updating a house or rental unit in Los Angeles County or Orange County, or other parts of Southern California, contact us to learn about ways we can help.

The 18th Street Townhome Apartments in Costa Mesa, Orange County - Getting Creative to Help the Seller Reduce and Defer Taxes

In 2013, Blake Buys Homes acquired a block of six townhomes in Costa Mesa, California, all owned by the same owner. This property was effectively an apartment building purchase in terms of how we determined what we could offer. At the time of purchase, the property was dilapidated and the owner had not done any updating for over a decade - only the necessary repairs and fixes to keep tenants from complaining.

Exterior - Before Renovations

Exterior - Before Renovations

In June, we were put in touch with the sellers, a very nice married couple in their mid 60's, who wanted to sell but were holding off due to the inevitable (so they thought) capital gains tax bill that they would face when the property sold. In case you don't want to keep reading, we did come to a very creative win/win seller financing solution that includes the seller's enjoying a fixed income for the next 35 years and complete deferral of taxes. The best part, according to them, was that theirs heirs would enjoy a 100% step up in basis upon their death which would eliminate the capital gain that was deferred and unless tax law changed, there would be no tax consequence if the loan was paid off and the heirs took the lump sum.

When we visited the property for the first time, we saw the typical list of deferred maintenance items that needed repairs. On the exterior: cracked and peeling stucco, roof tiles missing, saggy roof line, cracked and dangerous driveways, weeds everywhere, etc. On the interiors: evidence of water leaks, old water pipes with corrosion, items not up to code, flickering lights, broken cabinets, and the list goes on. Nothing we hadn't seen or that we were uncomfortable with so we proceeded with our offer to purchase the property. Our offer was for the property "as-is" and we didn't request that the seller make any repairs or updates. Any termite damage and items that were not up to current codes would be our problems to fix on our own dime. 

Interior - Before Renovations

Interior - Before Renovations

After the sellers had discussions with several apartment brokers and factored in all of their costs of selling, and the time and energy to market the property, they came back to us to let us know that they accepted our offer and we very content proceeding with the transaction. At this point, we had only discussed numbers and we had not delved into any creative ways that we could structure the transaction to not only fit their goals but leave them in a much better position of proceeds with lower taxes.

Prior to signing the Purchase and Sale Agreement, we recommended that the sellers think about what their goals are with the money they would receive from a sale, and to discuss the tax ramifications with their accountant, and get back to us. They took us up on the advice and after meeting with their accountant, we discussed their goals in further detail. This conversation gave us the information we needed to propose several creative ways to structure the transaction, one of which they loved (!), which was seller financing. The sellers accountant was very familiar with this method of selling and agreed that this was a great solution for the sellers given their low basis and long period of ownership (15+ years). The seller financing option allowed them to realize the full value of their property (approximately $2 million) in a great market for selling when prices were being elevated by the low interest rate environment (30 yr. fixed mortgages averaged about 4.00%), while simultaneously setting themselves up with a deferred tax bill and the ability to earn interest based on the $2 million valuation. The sellers knew this was a great seller's market and wanted to sell fast, and this was a property that fit our buying criteria so we were able to accommodate.

Here's the nitty gritty on how the transaction was structured: we signed a purchase and sale agreement at a purchase price of $2,000,000. We gave the sellers a down payment of $300,000 which was all they wanted and more than they needed at the time of sale. The remaining $1,700,000 was converted to a loan that was secured by the property, that would last for the next 35 years. In other words, if we defaulted on the loan payments to the seller, they could foreclose and take the property back. Since we were committed to spending approximately $350,000 in the first few months of ownership to renovate the property and increase the value, their secured interest would become much more secure as the improvements were completed. We agreed to make loan payments to the sellers via automatic check to be sent to them on the first of every month. Instead of paying approximately $450,000 in taxes when the property sold, this strategy allowed them to earn interest on the full pre-tax balance ($1.7 million) that was carried back with seller financing. They intended to use this income for retirement and the way we set it up, they now receive a monthly check of approximately $7,000...for the next 35 years! Pretty cool - they were very happy. The structure worked for us and the sellers agreed to allow interest only payments for the first few years so that we could use more of the rental income to make improvements instead of paying down the loan. This had the added benefit to the seller's of not receiving any principal in the early years, so the loan interest was based on the full $1.7 million balance.

This option would have worked whether we were dealing with a house, a condo used as a rental property, or a multifamily apartment building. After the purchase, the Blake Buys Homes Construction Team renovated each residence and all of the tenants couldn't be happier with their new home. All in all, this purchase was big success for everyone involved. 

If you have a property that you are considering selling a house or apartment property fast and you would like to go over some creative ways we could structure a sale, feel free to give us a call to talk about options. With Blake Buys Homes, homeowners pay no commissions and no fees. Visit our home page to learn more about our buying process and the benefits to homeowners that are considering selling their property.

The renovations shown in our pictures are the product of the Blake Buys Homes Construction Team (BBH Construction), which is comprised of the most high-integrity and hard-working subcontractors in Southern California. If you are looking for help renovating, fixing or updating a house or rental unit in Los Angeles County or Orange County, or other parts of Southern California, contact us to learn about ways we can help.

Below are a few pictures of the 18th Street property after renovations.

Exterior - After Renovations

Exterior - After Renovations

Interior - After Renovations

Interior - After Renovations