The number on the contract is not the number that lands in your bank account. Every Chattanooga seller learns that at the closing table. The ones who learn it there, instead of a month earlier, are the ones who feel blindsided.
The gap between the sale price and your check is made of four things: what you still owe on the house, the fees Tennessee custom assigns to the seller, the property tax split for the current year, and whatever you agreed to pay during negotiation, such as commissions, repair credits or help with the buyer's costs. A fifth, the months of bills you pay while the house is on the market, never shows up on the settlement statement at all.
This guide walks through each one the way it actually appears on a Hamilton County closing, using the standard Tennessee purchase contract and the state statutes that set the defaults. By the end you should be able to sketch your own net sheet before you talk to an agent, a buyer, or us.
Under the standard Tennessee REALTORSยฎ purchase agreement, the seller pays off every loan and lien, the deed preparation and seller's closing fee, and any past-due taxes or association dues. The buyer pays the state transfer tax and the cost of recording the deed. The current year's property taxes are split by date. Commissions, repair credits and help with the buyer's costs are whatever you negotiate, and those negotiated items are usually the biggest numbers on the page.
Who Pays What in a Tennessee Sale
Most homes in the Chattanooga area that are sold through an agent are sold on the Tennessee REALTORSยฎ Purchase and Sale Agreement, form RF401. It has a "Closing Expenses" section that divides the costs into seller expenses, buyer expenses and title expenses. Those are defaults, not laws. Anything in that section can be changed by agreement, and a cash buyer or a for-sale-by-owner deal may use a different contract altogether. But the form is a reliable picture of how costs are usually split in this state.
| Cost | Who pays under the standard Tennessee form |
|---|---|
| Mortgage, HELOC and any other liens | Seller, including penalties, release preparation and recording the releases |
| Payoff, estoppel and association statements | Seller pays any fee charged to produce them |
| Past-due HOA or association dues | Seller |
| Deed preparation and notary on the deed | Seller |
| Seller's closing fee, document fee or attorney's fee | Seller |
| Wire or courier fees to send lien payoffs | Seller |
| State transfer tax and recording the deed | Buyer |
| Title search, owner's and lender's title policies | Negotiated, written into the contract case by case |
| Current-year property taxes and dues | Split as of the closing date |
| Prior-year taxes, rollback taxes and special assessments already levied | Seller |
Notice what is not on that list: the commission. The form says brokerage is handled "as specified by separate agreement," meaning your listing agreement and whatever you agree to in the offer. We cover that below.
On title insurance, the RF401 leaves a blank line, so the split is literally a negotiation item. The premiums themselves are set by rates each title insurer files with the Tennessee Department of Commerce and Insurance, so the title company quoting you is not inventing a number. Ask early whether your contract has the seller paying for the buyer's owner's policy, because that line is easy to agree to without noticing.
The Transfer Tax Is Usually the Buyer's
A lot of sellers expect to pay a big transfer tax, often because they have sold in a state where the seller does. Tennessee does it differently.
The state's recordation tax under Tenn. Code ยง 67-4-409(a) is 37 cents per $100 of the consideration or the property's value, whichever is greater. On a $250,000 sale that is $925. The statute says the tax is paid by the grantee, the person receiving the property, and the Hamilton County Register of Deeds won't record the deed until it is paid. The standard purchase agreement matches that: the buyer pays the transfer taxes and the recording fees on the deed.
Two cautions. First, a buyer can ask you to pay it, and some offers do, usually bundled into a request that the "seller pay buyer's closing costs up to" a set amount. Read that line closely. Second, a buyer who takes title through a mortgage also pays a separate state tax on recording the deed of trust. That is entirely the buyer's cost and should never land on your side of the statement.
Your Payoffs Come Off the Top
For most sellers, the largest number on the seller side of the settlement statement isn't a fee at all. It is the debt secured by the house, and the closing agent pays it before anyone else gets paid.
- The mortgage payoff is higher than your statement balance. Mortgage interest is paid in arrears, so the payoff includes interest from your last payment through the day the lender receives the money. The closing agent orders an official payoff figure good through a specific date.
- A second mortgage or HELOC is a separate payoff. If you have an open line of credit, the lender has to freeze and close it, or a draw after closing can follow the house.
- Judgment liens, tax liens and contractor liens recorded against you or the house have to be paid or released for the buyer to get clear title. If you're not sure what's recorded, the title search will find it. Our page on selling a Chattanooga house with a tax lien explains how those are usually handled at closing.
- Past-due property taxes are paid out of your proceeds, along with any interest, penalties and court costs. If they have reached the Chancery Court stage, the figures get much larger. Our Hamilton County tax sale timeline explains why.
If the payoffs add up to more than the house will sell for, the rest of this guide stops mattering, because you would be bringing money to closing. Read our page on selling an underwater house in Chattanooga before you sign anything.
The Property Tax Proration Most Sellers Don't Expect
This is the line that surprises people most, and it's because of how Hamilton County collects.
Tennessee property taxes run on the calendar year, but the bill doesn't come until the fall. The Hamilton County Trustee's payment window opens October 1 and runs through the last day of February of the following year. Inside the Chattanooga city limits there is also a separate City of Chattanooga bill on the same schedule. In some smaller cities, including Red Bank and East Ridge, the Trustee collects the city tax along with the county's. So for most of the year, the taxes for the year you are living in haven't been billed yet.
The standard Tennessee contract handles that by prorating the current calendar year's taxes as of the closing date. If the year's tax rate hasn't been set yet, the proration uses the previous year's rate and assessment, and the parties agree to settle up if the final bill comes in different. In practice:
- If you close in June, you owned the house for about five months of a year whose bill hasn't arrived. You give the buyer a credit for those five months, because the buyer will pay the whole bill in the fall. That credit comes out of your proceeds.
- If you close in December after paying this year's bill, it runs the other way. The buyer reimburses you for the days after closing.
- If you close in January or February with last year's bill still unpaid, that bill is yours. It's a prior-year tax, and the contract assigns those to the seller in full.
Three related items also sit on the seller's side by default. Rollback taxes apply if the land is in the greenbelt program (agricultural, forest or open-space classification) and the buyer isn't keeping it there; that matters for the bigger parcels out toward Sale Creek and Harrison. Special assessments approved or levied before closing are the seller's unless the contract says otherwise. And association dues are split the same way taxes are, with any past-due dues paid by the seller.
Want to See Your Real Number?
Commissions Since the 2024 Rule Change
On a listed sale, the commission is usually the biggest cost you choose. No Tennessee law sets the rate. It is whatever you and your listing agent agree to in writing.
What changed is how the buyer's agent gets paid. Since August 17, 2024, under the practice changes that followed the National Association of REALTORSยฎ settlement, offers to pay the buyer's agent can no longer be posted on the MLS, and buyers working with an agent have to sign a written agreement with that agent before touring homes. In practice, sellers still often agree to cover some or all of the buyer's agent fee, but it's now negotiated deal by deal, often as a line in the buyer's offer rather than a number set in advance.
For your net sheet, that means two separate questions: what you owe your own agent, and whether you will agree to pay anything toward the buyer's agent. Get both in writing before you list, and ask your agent how buyers in your price range and part of town have been handling it.
Costs That Appear During Negotiation
These don't appear on any standard cost list because they don't exist until a buyer asks for them. They can easily add up to more than every fixed fee combined.
- Seller-paid closing costs. A common request is that the seller pay the buyer's expenses "not to exceed" a set dollar amount. It's especially common with first-time buyers using FHA or similar loans.
- Repair requests and credits after the inspection. Older Chattanooga housing stock (original wiring, galvanized plumbing, aging roofs, crawlspace moisture) gives inspectors plenty to write up. Each item becomes a repair, a price cut or a credit.
- Lender-required repairs. FHA and VA appraisers can make specific repairs a condition of the loan. Those aren't optional if you want that buyer to close.
- A home warranty for the buyer, if you agree to provide one.
- Pre-listing work: paint, cleaning, a dumpster for the cleanout, landscaping and staging. You pay for these whether or not the house sells.
Our guide to selling a house as-is in Chattanooga walks through which repairs usually pay for themselves here and which ones rarely do.
Carrying Costs Before Closing Day
None of these show up on the settlement statement, which is exactly why sellers leave them out of their math. Every month between deciding to sell and closing, you are still paying:
- The mortgage payment, including the interest that keeps building into the payoff
- Homeowners insurance, which may need to become a vacant-property policy if you've already moved out
- Electricity and water, kept on for showings and inspections
- Lawn care and basic maintenance, so the house still looks cared for in the listing photos
- Your share of the year's property taxes, which keeps growing through the proration
- HOA dues, if the neighborhood has them
Multiply the monthly total by a realistic number of months on the market, plus about a month for a financed buyer's loan to close. If the house is already empty, our page on selling a vacant house in Chattanooga covers the insurance and upkeep risks that come with it.
After Closing: Capital Gains and Paperwork
Tennessee won't tax your gain. The state has no tax on wages, and the Hall income tax, its last tax on investment income, was repealed for tax periods beginning on or after January 1, 2021. There is no state capital gains tax on a home sale here.
The federal government may. If the house was your main home and you owned and lived in it for at least two of the five years before the sale, federal law (Internal Revenue Code ยง 121) lets you exclude up to $250,000 of gain, or $500,000 for most married couples filing jointly. Rentals, second homes and inherited property follow different rules. Our landlord's guide to selling a rental and our guide to selling an inherited house in Chattanooga cover those cases. For your own numbers, ask a CPA.
Two more items. The closing agent generally reports the sale to the IRS on Form 1099-S, so the sale will be on record whether or not you owe anything. And if the seller is a foreign person under the Foreign Investment in Real Property Tax Act (FIRPTA), the buyer's closing agent has to withhold part of the sale price for the IRS. The standard Tennessee contract makes the seller responsible for allowing that withholding.
Build Your Own Net Sheet
You don't need anyone's software to get within a few thousand dollars of your real number. Fill in this worksheet with your own figures. Every line comes from a section above.
| Line | Where to get the number |
|---|---|
| Expected sale price | A realistic list or offer price, not the hoped-for one |
| โ Mortgage and HELOC payoffs | Your lender's payoff quote, plus a few weeks of interest |
| โ Other liens and back taxes | Trustee and city tax records; the title search |
| โ Commissions | Your listing agreement plus anything you'll pay toward the buyer's agent |
| โ Seller fees | Deed preparation, closing or attorney fee, release recording, wire fees (ask the title company for a quote) |
| โ Title insurance, if you agree to pay it | Title company quote at filed rates |
| โ Tax proration credit to buyer | Last year's county (and city) bill รท 365 ร days you own the house this year |
| โ Repairs, credits and seller-paid buyer costs | Your best guess, then a cushion |
| โ Months of carrying costs | Monthly bills ร expected months until closing |
| = What you actually walk away with | Compare this, not the sale price, between your options |
Here is a simple illustration with made-up numbers. Picture a $250,000 sale in Hixson with a $150,000 payoff and a closing on June 30. Last year's combined tax bill was $2,190, which works out to $6 a day, so the proration credit for the 181 days the seller owned the house this year is about $1,086. Add a commission rate the seller agreed to, a few hundred dollars of seller fees, a $3,000 repair credit and four months of carrying costs, and the check is often tens of thousands of dollars below "sale price minus mortgage." These are not quotes or market averages; the point is the shape of the math. Our cash buyer vs. realtor comparison runs a full side-by-side on a Chattanooga house.
How a Cash Sale Changes the List
When you sell to a cash buyer like Dignity Properties, several lines on that worksheet go away. There's no commission and no lender to require repairs. There's no inspection repair negotiation, because we buy the house as it stands, and the time on the market shrinks from months to weeks. When we buy, we pay the closing costs, including the title and closing fees. Your payoffs, any back taxes and the property tax proration still come out of the proceeds, because those belong to the house, not to the way it is sold.
We'll say what we say on every page of this site: if your house is in good shape and you have a few months, listing it will usually put more money in your pocket than a cash offer, even after commissions. A cash sale makes sense when the repairs, the carrying costs or the calendar would eat the difference. Run the worksheet both ways, then decide. Our compare options page sets the routes side by side, and how it works walks through our process from the first call to closing. If you'd like to see an as-is purchase, here's a Harrison house we bought that needed more repairs than the owners could take on. More answers are on our FAQ page.
Frequently Asked Questions
Who pays the transfer tax when you sell a house in Tennessee?
By default, the buyer. Tennessee's recordation tax under Tenn. Code ยง 67-4-409(a) is 37 cents per $100 of the price or value, whichever is greater, and the statute makes the grantee (the person receiving the property) responsible for it. The standard Tennessee REALTORSยฎ purchase agreement also assigns transfer taxes and deed recording fees to the buyer. A buyer can still ask the seller to cover it in the offer, so read the closing-cost lines before you sign.
How are property taxes handled when I sell my house in Hamilton County?
The current calendar year's taxes are split as of the closing date. Hamilton County bills in the fall, with a payment window from October 1 through the last day of February, so a sale earlier in the year usually means the seller gives the buyer a credit for the months the seller owned the house. If the year's rate isn't set yet, the standard contract uses last year's rate and assessment. Prior-year taxes and any rollback taxes are paid by the seller in full.
Do I pay state capital gains tax when I sell a house in Tennessee?
No. Tennessee has no state income tax on the gain from a home sale; the Hall income tax was repealed for tax periods beginning on or after January 1, 2021. Federal tax may still apply, but if the house was your main home and you owned and lived in it for two of the last five years, you can generally exclude up to $250,000 of gain, or $500,000 for most married couples filing jointly. Ask a CPA about your own situation.
What closing costs does a seller pay in Chattanooga?
Under the standard Tennessee contract, the seller pays off every mortgage and lien, plus the deed preparation, the notary on the deed, the seller's closing or attorney fee, the cost of recording lien releases, payoff and estoppel letter fees, wire fees and any past-due taxes or dues. Title insurance is negotiated. On a listed sale, the biggest costs are usually the ones you negotiate: commissions, repair credits and any help with the buyer's closing costs.
Does Dignity Properties charge closing costs or fees?
No. When we buy your house, we charge no fees or commissions and we pay the closing costs, including the title and closing fees. Your mortgage payoff, any liens or back taxes, and your share of this year's property taxes still come out of the sale proceeds. We'll show you that math in writing before you agree to anything. Call us at (423) 212-8384.
