Hidden Costs of Selling a Home That Every Seller Should Know

Hidden Costs of Selling a Home That Every Seller in Maryland Should Know

Selling your home can be an exciting journey, but the final proceeds often fall short of expectations due to various fees, taxes, and repairs. For sellers in the high-demand areas around Bethesda, Silver Spring, and Laurel, understanding these "hidden" costs especially local transfer taxes and potential repair liabilities is critical for accurate budgeting.

Being aware of these expenses upfront can help you budget more accurately and avoid unwelcome surprises at the closing table.

1. Real Estate Agent Commissions

This is typically the largest single expense for a seller. While not technically a "closing cost," it is a direct deduction from your sales proceeds.

• Average Rate: The average total commission in Maryland is a significant percentage of the home's sale price, split between the listing and buyer's agents.
• Local Impact: This applies whether you are selling a high-value property in Bethesda or a family home in Laurel. On a half-million-dollar home, the commission alone could exceed thirty thousand dollars.
• Tip: Commissions are negotiable. Discuss the rate and the services provided clearly with your agent before signing a listing agreement.

2. Government Transfer Taxes and Recording Fees (The Local Tax Burden)

In Maryland, a significant portion of your closing costs comes from various taxes and fees required to legally transfer the property deed.

• State Transfer Tax: The state transfer tax rate is a percentage of the sale price and is generally split between the buyer and seller.
• Local Transfer Tax (Montgomery County - Bethesda/Silver Spring): For properties in Bethesda and Silver Spring (Montgomery County), there is an additional County Transfer Tax fee, significantly raising the tax burden compared to other areas.
• Recordation Tax: This tax is charged by the county to legally record the deed. The exact fee will depend on your sale price and location within Maryland.
• Total Tax Exposure: These taxes can add up to well over one percent of the sale price for the seller, making it a critical item to budget for.

3. Seller-Paid Closing Costs and Concessions

Maryland sellers are responsible for the majority of the transactional closing costs.

• Buyer Incentives/Concessions: Sellers often agree to cover a portion of the buyer's closing costs or provide repair credits. Budgeting for buyer incentives is smart, as the average concession often reaches two percent of the sale price. This is a primary negotiation cost.
• Title Service Fees: The cost for the title company or closing agent to conduct the settlement and ensure a clean title is a set fee sellers must pay.
• Prorated Property Taxes: You are responsible for your share of property taxes up to the day of closing. This proration is a standard calculation for every home sale, including the many townhomes and condos in Silver Spring and Laurel.
• Home Warranty: Sometimes a seller will offer to purchase a one-year home warranty for the buyer (typically a few hundred dollars) to make the offer more appealing.
• VA Loan Requirement: If the buyer is using a VA loan, the seller is generally required to pay for the termite inspection.

4. Home Preparations and Repairs

Before and after the inspection, repair costs can be significant, especially with older housing stock common in Silver Spring and Bethesda.

• Pre-Inspection Repairs: Older homes, particularly in established areas, often require attention to small fixes to meet modern buyer expectations.
• Sewer Line Inspection: Homebuyers are increasingly requesting sewer line inspections, which can uncover major, expensive repairs in aging neighborhoods.
• Post-Inspection Negotiations: If your home is older, be prepared to negotiate repair credits or pay for fixes. While small repairs may be inexpensive, structural or major system issues (like roof or HVAC replacement) can cost tens of thousands of dollars.
• Staging: Professional staging, especially in the competitive Bethesda market, may be an up-front cost to maximize your sale price.
  

5. Mortgage Payoff and Other Lien Costs

• Mortgage Payoff: You will pay off the remaining balance of your mortgage, plus any accrued interest up to the date of closing.
• Unpaid Liens/Bills: Any outstanding liens against the property (e.g., contractor bills, second mortgages, or HOA liens) will be paid out of the closing proceeds.
• Non-Resident Withholding Tax: If the Maryland property you are selling is not your primary residence (meaning you didn't live there for at least three of the last five years), you may be subject to a percentage non-resident seller fee withheld at settlement.

6. Capital Gains Tax on Profit

While not a closing cost, capital gains tax is a critical financial consideration for long-term homeowners in the DC metro area.

• Federal Exclusion: You can exclude a substantial amount of profit (gain) from the sale of your primary residence, provided you meet ownership and usage rules.
• Local Risk: Due to significant property value appreciation in areas like Bethesda and Silver Spring, a growing number of Maryland homeowners are exceeding these federal exclusion limits.
• Maryland Capital Gains Tax: Any profit over the federal exclusion amount is subject to both federal and Maryland capital gains tax. Maryland taxes capital gains as ordinary income, and higher-income sellers may face an additional percentage tax on net capital gains, depending on the property value and income level.

Disclaimer: The figures and percentages provided are averages and are subject to change based on local market conditions, county regulations, and state laws. You should consult with a qualified real estate agent, title company, and tax professional to get a precise estimate for your specific home sale.