How much are the closing costs? | Property

The costs of buying and selling a home are often negotiable as part of the real estate transaction. A buyer may be willing to offer the full asking price as long as the seller is willing to cover the closing costs, which may include a home inspection and title transfer fee, for example.

For buyers, closing costs are often between 2% and 6% of the purchase price. Seller’s closing costs most often start at 5% to 6%, as sellers traditionally cover the realtor’s commission.

Who pays certain fees can also depend on location—states have different real estate laws, and counties or cities may have their own standard practices for real estate transactions.

Here’s a list of the closing costs buyers and sellers can expect in a real estate transaction, followed by descriptions and who traditionally pays:

Who typically pays this closing cost? Seller, buyer or both.

Often referred to as deed transfer tax or property transfer tax, this is a required fee that is separate from property tax. The transfer tax is charged when the deed is transferred to new ownership, and the buyer and seller can negotiate who covers the total cost.

You may find that separate transfer taxes for your state, county and city combine into a high amount; in some parts of the US, taxes can reach nearly 5% of the purchase price. And in some cases, like New York state, that percentage rises with the price of housing. “A lot of people have been renegotiating sale prices” as a result of this, says Tracie Golding, a licensed associate realtor for Stribling & Associates, a subsidiary of the real estate firm Compass in New York City.

Who typically pays this closing cost? Seller, buyer or both.

Closing costs known as the recording fee may be collected by the state or local government to cover the cost of filing the deed and lien information in the public records. In many state and local governments throughout the United States, the transfer tax and registration fee are the same, while others keep the two required payments separate. While the transfer fee is a percentage of the sale price, the registration fee is typically a fixed amount. In Los Angeles, for example, the fee varies based on the document, but starts around $97, with additional costs for more than one page, variations in the type of deed or details of the property. In Polk County, Iowa, on the other hand, the recording fee is $12 for the first page of a deed and $5 for each subsequent page.

Who typically pays this closing cost? The buyer.

Before taking title to a property, it is important to ensure that there are no existing liens or other claims on ownership. As John DeMarco, broker and owner of Re/Max 5 Star Realty in Hollywood, Florida, notes, “The sellers may not be aware that there is a lien on the property.”

Title insurance protects you against future claims on the property and often includes the cost of the title search. Homebuyers can purchase title insurance for their own protection while paying for title insurance for their lender, which is often a necessary step in getting a mortgage and also protects the lender from claims on the property.

The cost of title insurance varies based on the value of the property, but many home buyers pay between $1,000 and $2,000.

While lenders and realtors often have title insurance companies they work with regularly, you may find a title insurance company you like better or one that charges lower fees.

Who typically pays this closing cost? The buyer or the seller.

A title insurance company, escrow agent or attorney may handle the transfer of funds when selling a property and charge an additional fee for the work done at closing. The settlement fee can be directed at the buyer, seller or both in closing costs. However, this fee, which may be included in title or legal fees and is often at least a few hundred dollars, can often be negotiated between the buyer or seller to sweeten the deal beyond the sale price.

Who typically pays this closing cost? The buyer.

Some lenders charge a formal mortgage application fee, primarily to ensure that the buyer is serious. This is a flat fee, often as little as $25.

Who typically pays this closing cost? The buyer.

Taking out a loan typically covers the insurance process – when the lender decides whether you are worthy of a mortgage loan.

Your lender may charge separately for various costs that would otherwise fall under loan origination – namely the credit check to determine your creditworthiness for a mortgage loan. Other lenders keep the credit check “totally bundled into one fee,” says Max Koziol, senior director of lending for JPMorgan Chase, which does so. The fee for establishing a loan is around 1% of the total loan amount.

Who typically pays this closing cost? The buyer.

At closing, a homebuyer who gets a mortgage may pay additional fees to the lender to reduce the interest rate on the loan. One point equals 1% of the loan, so if you wanted to pay down 2 points on a $300,000 mortgage, for example, you would pay $6,000 for your interest rate to drop from 5% to 4.5%, but how much the rate drop depends by you and your lender.

However, it is not necessary to pay the interest down with points. It is based solely on cash that the buyer has available and is willing to pay at the time of closing. Down payment points can be a valuable tool to reduce the overall cost of the loan, even if it increases what you pay at closing. If your focus is to reduce closing costs, lenders can often comply, but it comes at the cost of a higher interest rate, DeMarco says. While a higher interest rate may mean lower closing costs, the buyer ends up paying more for the house in the long run. “It’s a trap that many consumers fall prey to,” he says.

Who typically pays this closing cost? The buyer.

During the pre-closing due diligence period, a certified professional often conducts a home inspection to check the condition of the home and point out maintenance issues, needed repairs or possible code violations. Some lenders require an inspection to check for defects that may not be apparent in an appraisal, but buyers often opt for an inspection to find out what repairs are needed after they get the keys.

While the cost of inspection is typically borne by the buyer, this expense is negotiable. A home seller can also choose to have a pre-inspection done, which the buyer can accept or choose additional inspections during the due diligence process. HomeAdvisor reports that the typical price range for a home inspection is between $281 and $402, but it varies depending on the inspector and the size of the home.

Who typically pays this closing cost? The buyer.

Many lenders require an appraisal to determine the property’s value before approving a purchase loan and to ensure it matches or exceeds the agreed sale price. An appraisal helps reduce the lender’s loss in a scenario where the borrower defaults on the loan.

You can look for a different appraisal company than the one your lender recommends. Don’t be afraid to shop around and compare costs, but be sure the appraiser you choose is one the lender will accept before you pay for the appraisal.

Who typically pays this closing cost? The buyer.

If there is any confusion about where the property starts and ends, a property survey may be necessary. To determine the final boundaries of a property, it is typically best to contact a professional land surveyor who can follow the exact measurements of the property’s legal description.

An inspection may be required by the lender, which of course is the buyer’s responsibility to pay. However, this expense can be negotiated to become the seller’s responsibility.

Who typically pays this closing cost? The buyer.

If the home you’re buying is part of a community managed by a homeowner’s association, you may be required to join an HOA and pay the associated fees at closing in addition to monthly or annual dues.

For example, in New York City, where many homeowners live in buildings that are part of a cooperative or condominium association, potential buyers are often required to approach the community board in addition to making an offer on the individual unit.

In a more suburban setting, where an HOA manages a community of single-family homes, the HOA may charge a fee to put the home on the market and for the paperwork associated with transferring ownership of the home in its own files.

Because these fees differ by state, community and building, buyers should keep them in mind when making an offer. A seller may be willing to cover a large HOA fee in exchange for a slightly higher sales price.

If a lien is discovered during the property search, the issue must be resolved before the deed can be transferred to new ownership.

In cases where the seller was unaware of the lien or now has the means to correct the problem, the seller is responsible for working with the lien holder to resolve the problem. In cases where the seller is unable to pay, the buyer can decide whether he or she will try to resolve the lien or withdraw from the transaction.

Who typically pays this closing cost? The seller.

There is no doubt that real estate agents get paid when a deal closes. Traditionally, the seller pays the commission to the real estate agents who represented both buyer and seller from the proceeds of the sale, which typically runs between 5% and 6%, divided between the two brokerage companies. The estate agents then get their share of the commission.

Who typically pays this closing cost? Buyer and seller, for respective lawyers.

In some parts of the United States, such as New York City and Chicago, a real estate attorney takes over the due diligence phase once a contract is signed for a property. The title search, appraisal and any other assessment of the property is overseen by the attorney instead of an escrow or title insurance representative.

Of course, buyers and sellers who use an attorney for these steps should expect to pay their attorney’s fees in addition to the fees for services performed by the attorney, e.g. a title search.

Who typically pays this closing cost? The seller.

Before you sell your home, check your existing mortgage agreement to see if there are any penalties associated with paying off your mortgage before the end of its term. The penalty can vary based on a percentage of the loan – for example 3% – or a certain number of months of interest payments. The Consumer Financial Protection Bureau notes that any prepayment penalty must be included as a clause in your original mortgage statement.

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