Buying or selling your home is a team effort. Various service providers contribute to a successful transaction. That includes your mortgage lender, a title company, attorneys, inspectors, appraisers, and, of course, your favorite real estate agent.
They all want to get paid. And this means you’ll incur a long list of fees when you close a real estate transaction.
Here’s a summary of the 5 types of closing costs you’ll have to pay …
1. Realtor Commissions
Let’s get this out of the way first. Realtor commissions are typically 6% of the purchase price. The agent representing the buyer expects 3%. The remaining 3% go to your listing agent.
Commissions are mostly paid by the seller. They are negotiable. However, keep in mind that you will get what you pay for. I see quite frequently how sellers or buyers lose tens of thousands of dollars by trying to do it themselves or work with an inexperienced discount agent.
I provide top quality service, negotiate on your behalf, get you higher offers when you sell, and help you avoid expensive mistakes when you buy. That’s why I charge 3% per side.
2. Lender Fees
If you need financing to buy your new home (most of us do), you will incur loan fees. Some lenders charge an application fee upfront. The majority of lender fees are paid at closing.
You may also have to “deposit” so-called pre-paids to establish a base for your escrow account and pay interest for the first month. This is your money, but the lender holds it to pay for property taxes and homeowners insurance.
Lender fees are usually not negotiable. You may shop lenders for different interest rates or lower upfront fees.
Loan related fees are paid by the buyer.
3. Title Fees
The title company manages the closing and the transfer of ownership. They also insure the buyer against liens on the property.
Most title fees are covered by the seller, including the title search and the owner’s title insurance policy. Furthermore, the lender’s policy is paid for by the buyers. Fees for closing the transactions itself are split between buyer and seller and are negotiable.
Title insurance premiums are regulated by the State. However, you may get a discount if you can show proof of title insurance from when you purchased the property within the last 10 years.
4. Government Fees
Uncle Sam wants a share of your home purchase. A transfer tax is paid to the county auditor, as well as recording fees. They are covered by the seller.
The buyer pays for recording the mortgage.
Property taxes are prorated at closing. In Franklin county property taxes are due in June and January. This past June we paid property taxes for the second half of 2018.
The new owner will have to pay property taxes for the time the seller occupied the house. That being said, that’s why the seller gives the buyer a credit on the closing statement.
This amount can be thousands of dollars. It helps the buyer cover some of their closing costs.
5. Out of Pocket Fees
Not all fees are paid at closing. Attorneys and other service providers expect payment whether you close the purchase or not.
As the buyer you pay for your home inspection, for your loan application, and for the appraisal.
The seller may incur out of pocket expenses for repairs to remedy problems discovered during the home inspection.
These fees can add up. Often, they amount to more than 10% of the purchase price. There’s no easy way to avoid them.
Your best bet is to work with an experienced real estate agent who can help you get more money for your property, reduce the risk of financial loss, advise you on all necessary inspections, and, most importantly, negotiate the very best deal for you, whether you buy or sell.
Call or text me TODAY at (614) 975-9650 Let me guide you through the buying and selling process!
Susanne Novak has been a Realtor since 2007. She is the broker and owner of RE/MAX 24/7 in the Dublin Historic District. Susanne typically helps 50-60 families each year with their real estate needs. She's your trusted advisor when you search for your dream home, and a skilled negotiator when she lists your property to get top dollar when you sell.