Why Sellers Pay Settlement Charges at Closing

Question:

I am the listing agent and my seller doesn’t think he has to pay any attorney fees and costs at closing.  Is this correct?

Answer/Recommendation:

Many sellers do not realize they may have to pay some fees and costs at closing.  A good seller’s agent will point out to their seller, at the outset of the listing agreement, that they may have to pay some fees and costs at closing.

It is important to distinguish between buyer’s closing costs and seller’s closing costs.

If the seller did not agree to pay for any of buyer’s closing costs, then the seller won’t have to pay for any of the buyer’s attorney fees and costs.

However, the seller might still have attorney fees for which the seller is responsible.

Here’s why:

According to lines 235 to 237 of the Louisiana Residential Agreement to Buy or Sell,

“SELLER’s title shall be merchantable and free of all liens and encumbrances except those that can be satisfied at Act of Sale. All costs and fees required to make title merchantable shall be paid by SELLER.”

Attorney fees that are seller’s responsibility (unless the parties agree otherwise in writing) may include:

1.Fees to satisfy and cancel seller’s mortgage or mortgages;

2.Fees to satisfy and cancel any Judgments filed against seller;

3.Fees to satisfy and cancel any tax liens filed against seller;

4.Fees to distinguish any Judgments and/or liens filed against someone with a name similar to seller.

 

It’s a good idea for a seller’s agent to let their seller know ahead of time that they might have some fees to pay at closing for the above items, so the seller isn’t surprised when they get a copy of the HUD/Settlement Statement.

If the seller’s agent doesn’t address the ability of his or her client to pay fees/costs at closing and the seller has to bring money to the closing table in order to sell the property (which the seller did not account for), this might lead to one “unhappy client.”

If your seller doesn’t want or can’t afford to pay any attorney fees/costs at closing, then this should be discussed with the seller during contract negotiations and included in the contract.

For questions related to estimated seller paid attorney fees/costs, please email rye@tutentitle.com.

H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.

The information contained herein is simply for informational purposes only and not intended to provide legal advice or create an attorney-client relationship.