Thinking about selling your land? Great! But before you celebrate, let’s talk about something that often catches sellers off guard: closing costs. These extra fees can sneak up on you, but don’t worry—we’ll help you understand them so there are no surprises.
Key Mistakes That Landowners face When Selling Land:
- Title Fees
- Escrow Fees
- Legal Fees (Attorney)
- Surveying Fees
- Appraisal Fees
- Transfer Taxes
- Recording Fees
- Mortgage and Loan Penalties
- Other Fees to Consider
In some places, closing costs may be surprisingly high. For example, in Florida, they rank among the highest in the country. So before you sign on the dotted line, know what to expect and who is responsible for paying these costs.
What Are Common Closing Costs You May Find in Land Sales?
As we mentioned, closing costs may affect your final payment. Many sellers overlook these expenses and realize later that they have reduced their earnings.
1. Title Fees
Title fees cover the legal verification of your property to ensure the sale is valid and that you receive a clear title with no ownership disputes. These fees typically include title insurance, which protects both you and the lender from potential claims, errors, or undisclosed liens on the property.
Title fees may also cover a public records review to verify ownership history. Costs generally range from $500 to $1,000, depending on the complexity of the property’s history.
Common title fees include:
- Title Closing Fee: Paid to title specialists to handle the transaction.
- E-Recording Fee: Paid to the Clerk of the Circuit Court for electronically recording the title.
- Owner’s Coverage Premium: Paid to the title company to secure coverage for your ownership rights.
2. Escrow Fees
Escrow fees cover the cost of a neutral third party (an escrow company) managing funds and documents during the transaction. This ensures that all contract terms are met before the sale is finalized. Escrow services provide secure handling of money and paperwork, helping both buyers and sellers navigate the process smoothly.
Estimated costs typically range from $500 to $1,000, depending on the property’s sale price. These fees may also include verification services to confirm ownership and ensure compliance with legal requirements.
Together, title and escrow services ensure that ownership of the land is legally transferred and all documents are handled correctly. These services verify that the land is legally yours to sell and protect you from potential issues with the property's title.
3. Legal Fees (Attorney)
Attorney fees cover legal services required to ensure a smooth and legally sound land sale. Real estate attorneys review contracts, verify title documents, and oversee the closing process to protect your interests.
Estimated costs typically range from $500 to $3,000, depending on the complexity of the transaction and state requirements. In some states, a real estate attorney is required to manage the closing process and review all legal documents.
Common Attorney Fees for Selling Land Are:
- Title Examination Fee: Ensures the land has no liens, encumbrances, or ownership disputes that could delay the sale.
- Settlement Fee: Covers the attorney’s role in preparing and reviewing closing documents to ensure legal compliance.
- Deed Preparation Fee: If a deed transfer is needed, an attorney drafts the new deed to legally transfer ownership.
- Contract Review: If a purchase agreement is in place, an attorney can review and negotiate the contract to protect your interests.
4. Surveying Fees
A survey fee covers the cost of a professional land survey to confirm exactly where your property begins and ends before a land sale. This typically includes boundary verification to prevent disputes, encroachment detection to identify any structures crossing property lines, and survey updates if required by a buyer or lender.
Prices usually range from $400 to $1,000, depending on the size and location of the property.
5. Appraisal Fees
An appraisal is conducted by a licensed professional to determine the fair market value of the land. If the buyer is financing the purchase, most lenders require an appraisal to ensure the loan amount doesn’t exceed the property’s worth. In this case, the buyer is typically responsible for the cost.
For cash sales, appraisals aren’t mandatory, but some buyers choose to get one to avoid overpaying. In these cases, they might include a contract contingency requiring the land to appraise at or above the agreed price.
Appraisers consider several factors such as property size, location, condition, and market trends to determine land value.
6. Transfer Taxes
Some states and counties charge a transfer tax when land ownership changes hands. This tax is applied at the time of sale, and the cost can vary depending on your location, it may be a flat fee or a percentage of the sale price. To avoid surprises, it’s important to check local regulations and understand how much you might owe when selling your land.
7. Recording Fees
Every time property ownership is transferred, a recording fee is paid to officially document the sale with the local government office. This ensures that the new ownership is legally recorded and accessible in public records.
The cost of recording fees varies by county and city, as each sets its charges. Fees are typically based on factors such as the number of pages in the deed and the property value. In most cases, the buyer covers this expense as part of their closing costs, but the seller and buyer can negotiate who pays.
8. Mortgage Payoff & Loan Penalties
If your land is still financed, you will need to pay off the remaining balance before completing the sale. Some lenders impose early repayment penalties, so it's important to check with your lender to see if this applies to your situation. Prepaid interest may also be required to cover interest accrued before the final loan payment.
Other Fees to Consider When Selling Your Land
When selling land, additional costs may arise beyond standard closing fees. Here are some key expenses to keep in mind:
- Real Estate Agent Commission: If working with an agent, commissions typically range from 3% to 6% of the sale price.
- HOA Fees: If the property is part of a homeowner’s association (HOA), you may be responsible for outstanding dues or transfer fees.
- Environmental & Utility Assessments: Buyers may request soil tests, percolation tests, or utility connection verifications before finalizing the sale.
- Marketing & Advertising Costs: If selling on your own, costs may include listing fees, professional photography, and signage.
- Courier Fees: Covers the cost of transporting important sale documents.
Who Pays for These Costs?
Some of these fees will likely be your responsibility, while others can be negotiated with the buyer. It all depends on the location, property type, and terms of the sale. Understanding these costs upfront helps you plan and avoid unexpected expenses.
If you’re already aware of these fees, it’s a good idea to discuss them with your buyer early in the process. That way, there are no surprises when it’s time to close the deal. And if you need help sorting through the details, we’re here for you!
At UNITY, we provide further assistance to ensure a smooth and stress-free sale.
How to Reduce Closing Costs?
Closing costs can add up, but there are ways to minimize them. Here are some smart strategies you may implement or already know:
- Compare Title and Escrow Services: Not all companies charge the same rates. Shopping around can help lower costs.
- Request a Title Insurance Discount: If you’ve owned the land for only a few years, you might qualify for a reduced rate.
- Negotiate Agent Commissions: Real estate commissions aren’t fixed. If working with an agent, discuss possible adjustments.
- Consider Direct Sales: Selling directly to a cash buyer like UNITY eliminates agent commissions and lender fees.
- Understand Your Tax Benefits: A tax professional can help you explore deductions or exemptions related to your sale.
When you're ready to sell, UNITY makes it effortless. No hidden fees, no surprises. Our expert team will guide you through every step, ensuring a smooth and successful land selling experience.
