Closing Costs: What Are They, And How Much Will You Pay?
Before you start celebrating after accepting an offer for your home, you need to consider the closing costs. These expenses are deducted from your (the seller’s) account before the deal is closed.
When you choose Mark Spain Real Estate as your partner when selling your home, you get the guidance you need to tackle the financial complexities coming your way. Our experienced agents will guide you through every step of the process.
Read on to learn more about the closing costs when selling your home.
What Are Closing Costs?
Closing costs are the expenses buyers and sellers must pay to finalize a real estate transaction. These include administrative costs incurred for the required due diligence, including origination fees, attorney fees, title searches, discount points, appraisal fees, taxes, and survey charges.
Three days before the settlement date (when the transaction is completed), the lender has to provide a closing disclosure that enlists all these costs.
Common Types of Closing Costs
All the closing costs are related to the due diligence required to make the real estate transaction happen. These costs go to different entities, including attorneys, insurance companies, and mortgage companies. Here’s the breakdown of all the types of closing costs:
- Loan Origination Fees: The lender who lends to the buyer must ensure the buyer’s ability to pay back. For that, the lender charges an underwriting fee for loan approval. The Origination Fee is the fee that the lender charges to the buyer. It is usually 0.5 to 1 percent of the sale price.
- Attorney Fees: Some states require you to have an attorney for a real estate transaction. Their fees are bundled with the other closing costs. The attorney fees differ from attorney to attorney.
- Title Searches: This cost is not part of the closing costs if the home is brand new. In all other cases, the lender will require a title company to search the property records and ensure that there isn’t a problem with the property title, such as a tax lien, etc. Depending on your state, it can cost between $100 and $500.
- Underwriting Fees: Charged by the lender, the Underwriting fees are the charges incurred to verify your financial qualifications and eligibility.
- Discount Points: Also known as Mortgage Points, are paid to the lender at the end of the closing for charging a lower interest rate.
- Appraisal & Survey Fees: Appraisal and Surveys help property buyers analyze the market price before sending an offer. Specialized companies for surveys and appraisals are paid this fee, which can cost several hundred dollars.
- Inspection Fees: The home Inspector charges these fees. The fees depend on the type of inspection the inspector conducts and can range from a few hundred dollars to a thousand or more.
- Real Estate Agent Commission: Real estate agents (buyers’ and sellers’ agents) charge these fees. Commonly, the seller pays both agents.
- Transfer Tax: Transfer Tax, or the deed transfer tax, is the tax states charge when transferring real property. It differs from state to state.
- Who Pays Closing Costs?
The buyer pays the majority of the closing costs outlined above. However, sellers also have to pay some closing costs.
The costs paid by the buyer are:
- Appraisal Fees
- Title Search Fees
- Origination Fees
- Underwriting Fees
- Discount Points
- Home Inspection
- Attorney Fees
The costs paid by the seller are:
- Real Estate Commission
- Transfer Tax
- Other Charges (Seller Concessions, Attorney Fees, etc)*
*Other charges the seller pays are often included in the seller concessions–when the seller voluntarily opts to spend a chunk of closing costs. It happens when the seller wants to sell the property faster.
When Are Closing Costs Due?
Most of the closing costs are paid on the closing date. However, as a buyer, you must pay some fees, such as appraisal and inspection, beforehand.
Can You Include Closing Costs Into Your Loan?
Yes. You can include the closing costs in your loan and not pay them in full at the closing. It is known as “rolling” the closing costs. However, this means that the closing costs will now be part of your loan, causing you to pay more for mortgage and interest payments.
Maneuvering the financial complexities of a real estate transaction is difficult for an inexperienced person. Therefore, you must partner with someone who can help you out. Mark Spain Real Estate strives to make your real estate journey seamless and stress-free. Learn more about our programs!
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