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So, you’ve decided to sell your home. Maybe you’re looking at moving within Tennessee to get closer to the mountains, or perhaps job changes are taking you elsewhere. First off, congratulations – listing your property is a huge step. But before you start mentally spending that check from the closing table, we need to talk about the numbers that don’t always make it into the headline price.
Selling a house isn’t free, and the costs come directly out of your profit. If you are selling in Knoxville, Chattanooga, or anywhere in the Tri-Cities, you need to be prepared for the bottom line, not just the top line.
Generally speaking, you should expect to pay roughly 1% to 3% of the sale price in various closing fees and taxes. On top of that, if you hire a real estate agent, commissions usually run another 5% to 6%. When you add it all up, typical selling costs in our area land somewhere between 6% and 9% of your final sale price. It sounds like a wide range, but East Tennessee has some specific local customs – especially around title insurance – that can swing that number up or down depending on which county you call home.
Real Estate Agent Commissions: The Biggest Line Item
Let’s tackle the biggest expense first. For most sellers, real estate commissions will be the largest deduction from your proceeds. Historically, the standard total commission has hovered around 5% to 6% of the sale price.
This fee is typically split between the listing agent (who markets your home) and the buyer’s agent (who brings the purchaser). For a long time, this was just how things were done, but the industry has seen some major shifts recently. Following recent legal settlements, buyer agent compensation is officially negotiable and no longer an automatic requirement for listing a home on the MLS.
However, just because it isn’t required doesn’t mean it has disappeared. Many sellers in competitive markets like ours still choose to offer a commission to the buyer’s agent as a strategy to attract more traffic and get offers on the table faster. If you are selling a home for $350,000, a 6% total commission would mean $21,000 comes off the top. It’s a significant number, so it is worth having a frank conversation with your agent about what commission strategy makes sense for your specific property.
Tennessee Realty Transfer Tax
Once you move past commissions, you run into the state fees. Tennessee charges a Realty Transfer Tax on the recording of all deeds. It is important to note that this is a state tax, not a federal one, and it applies to almost every standard residential sale.
The rate is set at $0.37 per $100 of the property value. In simpler terms, that is 0.37% of the sales price. While everything in real estate is technically negotiable, in most Tennessee transactions, it is customary for the seller to foot this bill.
To give you a quick idea of the math, if you sell your home for $350,000, you would divide that by 100 and multiply by 0.37. That comes out to $1,295. It’s not a budget-breaker compared to commissions, but it is certainly big enough that you don’t want to forget it when calculating your net proceeds.
Title Insurance and Search Fees: East TN Nuances
Here is where things get a little tricky, and where local knowledge really pays off. If you were selling a home in Nashville or Middle Tennessee, you would almost certainly pay for the Owner’s Title Insurance Policy. It’s just the norm there.
But here in East Tennessee, specifically around Knoxville and Chattanooga, customs are different.
First, there is the Title Search. This is a fee paid to verify that you have the legal right to sell the property and that there are no hidden liens. This usually costs between $200 and $400.
Then there is the Owner’s Title Policy, which protects the buyer from future claims against the property. In many of our local counties, this cost is often negotiable or even frequently paid by the buyer. For example, in parts of Hamilton County or Knox County, you might see the buyer paying for their own policy, or splitting it, whereas in other nearby areas, the seller might still pick up the tab to sweeten the deal.
Because this varies so much by county (and even by specific neighborhood or price point), you need to ask your agent what is standard for your specific zip code. If you do end up paying for it, the cost typically ranges from 0.5% to 1% of the purchase price.
Prorated Property Taxes and HOA Fees
Another set of numbers you’ll see on your settlement statement involves prorations. This is just a fancy way of saying “splitting the bills fairly” based on the exact day you close.
In Tennessee, property taxes are paid in arrears. That means the tax bill that comes at the end of the year covers the previous 12 months. Since you won’t own the house at the end of the year when the bill is due, you have to credit the buyer for the days you lived there. If you close on July 1st, you effectively owe the buyer for January 1st through June 30th. They will take that money and pay the full bill when it arrives in winter.
If you live in a community with a Homeowners Association (HOA), you also need to account for dues. Unlike taxes, these are usually paid in advance. If you paid for the whole month but move out on the 15th, you might actually get a small credit back. However, watch out for the HOA Transfer Fee. Management companies often charge $200 to $300 just to update their records with the new owner’s name, and that fee often falls to the seller.
Other Common Seller Fees
Beyond the big ticket items, there are a handful of administrative fees that will show up on your closing disclosure. They are smaller individually, but they add up.
- Settlement or Closing Fee: This is paid to the title company or attorney for physically conducting the closing and handling the paperwork. It usually runs $300 to $500.
- Recording Fees: This is separate from the transfer tax. It’s a flat fee paid to the county Register of Deeds to officially record that your mortgage has been paid off and the deed has been released. Expect around $150.
- Wire or Courier Fees: If you have a mortgage to pay off, the title company will charge a small fee, usually $30 to $50, to wire those funds or overnight the check.
Example Seller Net Sheet ($350,000 Home)
It is always easier to understand these costs when you see them in black and white. Let’s look at a hypothetical scenario for a single-family home in the Knoxville area selling for $350,000.
Keep in mind, this “Net Sheet” calculates what you walk away with before you pay off your remaining mortgage balance. Your final check will be the Net Proceeds minus whatever you still owe the bank.
- Sale Price: $350,000
- Commission (estimated 6%): $21,000
- Transfer Tax (0.37%): $1,295
- Title Search & Settlement: $500 – $1,000 (Assuming seller pays search/closing fee, but buyer pays title insurance)
- Prorated Property Taxes (approx. 6 months): ~$600 (This varies heavily by county tax rate)
- Recording & Misc Fees: $200
- Total Estimated Closing Costs: ~$23,500 – $24,500
- Net Proceeds: ~$325,500 (minus your mortgage payoff)
This gives you a realistic baseline. If you are trying to figure out if you can afford that upgrade to one of the best places to live in East Tennessee, starting with a conservative net sheet like this is the smartest first step.
Tips for Reducing Your Closing Costs
If those numbers made you flinch, you aren’t alone. The good news is that you have some control over your bottom line.
One of the most effective ways to save is to negotiate commissions. Don’t be afraid to interview multiple agents. Some may offer a lower listing rate, especially if you are also buying your next home with them.
You can also negotiate title fees. Since we are in East Tennessee where customs are fluid, you can explicitly ask the buyer to cover the title insurance in your counter-offer. In a seller’s market, buyers are often willing to absorb this cost to secure the house.
For the bold, selling “For Sale By Owner” (FSBO) eliminates the listing agent commission entirely, though you usually still have to pay the buyer’s agent if you want them to bring clients. Just remember that FSBO requires you to handle all the marketing, legal paperwork, and negotiation yourself. Alternatively, flat fee MLS services can get you on the market for a set price without the full-service commission model.
Understanding these costs upfront helps you price your home correctly and ensures there are no nasty surprises on closing day.
FAQs
Who pays for title insurance in Tennessee: buyer or seller?
This depends heavily on where you are located. In Middle Tennessee (Nashville), the seller almost always pays. In East Tennessee (Knoxville, Chattanooga, Tri-Cities), it is often negotiable or paid by the buyer, so you should check with a local agent about the norm for your specific county.
How is the Tennessee realty transfer tax calculated?
The tax is calculated at a rate of $0.37 per $100 of the property’s value. For example, on a home that sells for $200,000, the transfer tax would be $740.
Are closing costs tax deductible for sellers in Tennessee?
Closing costs are generally not tax-deductible in the same way mortgage interest might be. However, they are added to your “basis” in the home, which lowers your total capital gain. This can help reduce the amount of capital gains tax you might owe if you have made a significant profit.
Do sellers pay closing costs on cash offers?
Yes, sellers still have costs even if the buyer pays cash. You will avoid lender-specific fees, but you are still responsible for the real estate commissions, the state transfer tax, prorated property taxes, and title search fees.
