What Debt Needs to Be Paid Off at Closing When Selling Your House?


When you sell your house, you should always have a target price in mind. The amount of money that is required to pay off the existing mortgage, service any extra HELOC debt, pay your agent, cover closing expenses, and still have enough money left over to purchase another property are all factors that go into determining how much the net proceeds need to be. Buyers are not concerned with what you need to net, but you must be, and pricing your product or service realistically may or may not help you reach your objective. Buyers are not concerned with what you need to net.


If you are in the midst of a buyer’s market and are looking for leverage to tempt a buyer, you could consider offering to pay toward the buyer’s closing expenses. The majority of lending institutions let the seller to pay up to 6 percent of the buyer’s closing fees. Your net proceeds from the sale will be lower as a result, but the expenditures associated with the sale are tax deductible.

Pay Off Your Secured Debt

When a piece of real estate is sold, the revenues from the transaction are often used to settle any debts that are secured by the property. When you sell your property, the mortgages, if any, that are attached to it are normally the first ones to be paid off. When your house is eventually sold, any tax liens or liens related to student loans are paid off. In addition, escrow is used to pay off any obligations that are secured by your property, such as equity lines of credit or even construction liens.

Pay Liens and Judgments

Debt that is not secured by any of the property you possess is known as unsecured debt. Credit card debt is an example of common unsecured debt, which often isn’t subject to settlement in the event that a property is sold. On the other hand, if an unsecured creditor wins a judgement against you, a lien may be placed on the title of your property, and the amount owed would be subtracted from the profits of the sale when it was finalised.

Taxes and Municipal Utilities are Due and Payable

All municipal or government-related debt is paid off when a house is sold. This includes delinquent property taxes as well as delinquent payments for municipal services such as water and sewage. The majority of the time, the sale of a seller’s property cannot go through unless the seller demonstrates that all of the utility bills, including the electric bill, have been paid in full.

Special Assessments Don’t Disappear

When the date of closing draws near, special assessments may be imposed by the municipality or even the HOA. All of these local special assessments are typically included in the property taxes that are paid by property owners; however, money are put aside for the municipality in the event that the assessments are not met at the time of the closing. However, municipal special assessments on properties are often the topic of pre-sale talks since they may be paid off by either the seller or the buyer of the property.

Nearing the Bottom Line

Additionally, the seller is responsible for paying closing expenses, which, when added together, may add thousands of dollars to the total amount that is required to be repaid. In addition, there have been instances in which owners have sold property only to discover undisclosed secured and unsecured debt in addition to liens that were assigned to it after the sale. There is a possibility that you may be required to clear the title of any title clouds or previous liens that appear on the buyer’s report. Finally, after gaining title to the property, property purchasers have discovered debt tied to the property that had belonged to prior owners. This is where the cost of title insurance earns its fee, since this is where the debt was originally owed. If a problem in the title is discovered after the ownership of the property has been transferred, the title firm, the buyer and seller, and maybe an attorney will need to provide their comments.