What are closing costs? Who pays them?
In real estate, closing costs are the fees and charges in excess of the purchase price of the property that are due at the closing of the transaction. For example, if you think that you’re going to only pay $600,000 for a house because that’s what the accepted offer price is, you’ll actually be paying that amount plus your closing costs.
It’s important to understand how much your closing costs will impact your financing. For instance, as a buyer, you’ll have many more closing costs than a seller would. Typically, you’ll have mortgage costs, meaning things like the loan origination fees and the lender’s title insurance. Additionally, you’ll have to pay for home insurance, escrow fees, and the homeowner’s title insurance as well. Beyond those, there’s the notary signing fee, a recording fee, and depending on where you are, you might have to pay a flood insurance certificate.
Seller closing costs aren’t as extensive. They typically have to do with the broker’s or agent’s sales commission, which is paid via the proceeds of their sale. Sellers also have to pay notary fees and county transfer taxes, which are pretty standard at about $1 per $1,000 of the purchase price. Sometimes there are city transfer taxes, but those don’t apply in every city. Sellers traditionally have to pay for the Natural Hazard Report which is about $100.
In the end, both buyers and sellers have to pay closing costs, so it’s critical you understand exactly what you’ll need to save up for before you make a purchase or sell your home.
If you’re thinking of buying or selling and would like an accurate calculation of how much your closing costs will be, reach out to us via phone or email. We’d love to help you figure out what you need to do to achieve your real estate goals.