Thinking about selling your Kauai home? This blog goes over seller closing costs in Hawaii.
There are costs that get accrued when selling a property. Luckily in a quickly appreciating market on Kauai the seller can usually easily cover their closing costs. This blog will give you a general idea of closing costs when selling a property. That way there are no surprises!
Don’t worry this list may seem intimidating. However, most of these are not too large and they are necessary to have a secure stress-free transaction.
Learn the main sellers closing costs Hawaii to expect when selling a property.
Home Seller Closing Costs Hawaii
Be sure to read the bottom where I have actual examples
Real Estate Comission
This is the biggest expense and it’s worth it to hire a licensed professional. In Hawaii, real estate sales commission is usually 6% of the sales price. 3% for the listing brokerage and 3% for the buyer’s agent/broker who represents the buyer. From that 3% a portion goes to the agent’s Brokerage and the remaining will go to the agent.
Your real estate agent is supposed to be there every step of the way from getting your property ready to list to closing. Another reason why it pays to work with a licensed company is that we hold a license.
Title Insurance / Report
The seller pays for 60% of the title insurance or the title report while the buyers pay for 40%. This title report proves that the seller owns the property with a clear title. Therefore, it costs more for the seller to show their ownership.
Escrow Fee
The escrow fee is to pay the escrow company involved in the transaction. Escrow is so important. This company helps with the title insurance, drafting costs, notary and most importantly being a mutual party for our transaction. Most importantly escrow holds on to the buyer’s funds and delivers the funds at closing to the seller.
Conveyance Tax
This tax is imposed on the seller with any type of sale. It is calculated differently depending on if the property was owner-occupied or investment property. And it’s also dependent on the sale price. Overall this tax is not too high in my opinion.
Seller Notary Fees
A notary is needed to sign the final closing documents. The escrow company being used is also a notary. However when the seller is off-island many times a mobile notary is used.
Drafting Costs & Recording Fees
There are a few drafting costs for the bill of sale and conveyance documents. This is usually a small fee.
Termite Inspection & Treatment
Traditionally, the seller pays for a termite report and has the responsibility to treat the termites if any are found. However, this can be negotiated in the purchase contract.
Staking/Survey of Property
The same thing goes for staking or surveying the property. This is typically a seller’s expense however it can be negotiated in the purchase contract.
FHA or VA closing costs (if applicable).
Commonly in the past that FHA and VA loans could not pay for certain closing costs. Today because the market is so competitive the buyers doing these loans pay for their closing costs on their own (most of the time).
Condominium Documents
All condominiums come with condo documents. Therefore sellers are required to deliver those to the buyer. Some condominium documents have to be retrieved through a website like Docutrieve and there is a charge.
HARPTA/FIRPTA & Other Capital Gains Tax
HARPTA and FIRPTA are withholdings that get sent to the state to be sure that out-of-state sellers pay their capital gains taxes from the sale. HARPTA is 7.25% of the sale amount for US residents that are out of state. FIRPTA is for out-of-county sellers and that is a 15% withholding. Escrow has to withhold these amounts it’s the law. Speak to your accountant about filing the necessary paperwork to get whatever money back that you can. If you don’t have a large capital gain you will most likely get a good amount of that money back.
For other capital gains concerns please check with your accountant. If interested in a 1031 exchange. See this blog.
Actual Example
To get a quick estimate I usually use Title Guaranty’s website and use their TG Estimator.
Here are two examples of closing costs and different price points:
Example 1 – Seller closing costs of a 2 bedroom condo – Sale Price $380,000
Realtor Commission: $22,800
Escrow fee: $829.85
Title Insurance: $1,053.
Conveyance Tax: $570.
Termite Inspection: 235.60
Attorney Docs: $172.77
Condo Documents: $130
Totaling: $25,791.67
Example 2 – Seller closing costs of a 3 bedroom home – Sale Price $785,000
Realtor Commission: $39,250.
Escrow fee: $1,230.37
Title Insurance: $1,665.00
Conveyance tax: $1,962.50
Termite Inspection + Termite Fumigation: $549.74 + $4,221.99
Attorney Docs: 172.77
Staking fee for Surveyor: $575.92
HARPTA withholding: $56,912.50
Notary: $175.00
Cleaning: $230.37
Clearing trees to prep for fumigation: $261.25
Totaling: $107,210.41 excluding HARPTA is $50,297.97
Final Thoughts and Advice
I’m hoping this blog isn’t scaring anyone out of selling. It’s a terrific time to sell a property right now. As you can see from the two examples the seller closing costs were a lot different as were the sale prices.
It is important to pick the right Realtor for you to get the most amount of money possible for your sale. And remember on the flip side that it does not cost any money for the buyer to purchase a property!
Most real estate companies will pay to market their listings so that’s an expense a seller should not have to worry about once listed with a Brokerage.
This blog is all about seller closing costs in Hawaii. If you have any other questions regarding closing costs if selling your property on Kauai feel free to contact me!
