Understanding Closing Costs

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Closing Costs, and who typically pays for what is a question real estate agents are constantly being asked. I feel like closing costs get left out when talking about a real estate transaction. Buyers and sellers need to be well informed, knowing what they’re responsible for, and what it’s going to cost them. Buyers and sellers split a lot of these cost but on a typical transition this is who pays for what.

Commission: Typically, a real estate agent will receive 6% of a home’s sale price, on a percentage, split between the buyer’s agent and the seller’s agent and this is always paid for by the seller.

Appraisal: An appraisal covers the cost of having a professional appraiser evaluate a home and estimate the market value of the home. An appraisal is necessary because the bank wants to make sure that the home they’re lending on is worth what is being loaned against it in the case a buyer defaults on the loan. This is paid by the buyer.

Home inspection: Most banks will require a home inspection before lending you the money necessary to purchase a home to make sure the home is structurally sound. The bank will normally not loan on a home that is not structurally sound and not in good enough condition to live in. This is paid for by the buyer.

Application fee: This covers the cost of processing your request for a new loan and includes costs such as credit checks and administrative expenses. The application fee varies depending on the lender and the amount of work it takes to process your loan application.

Loan origination fee: This is also known as an underwriting fee or processing fee. This fee is an upfront charged by the lender for evaluating and preparing your mortgage loan. This can cover document preparation, notary fees and the lender’s attorney fees. This is paid for by the buyer.

Title search fee: A title search is conducted to ensure that the person selling the house actually owns it and that there are no outstanding claims or liens against the property. This can be fairly labor-intensive, especially if the real estate records aren’t computerized. Title search fees are about $200, but can vary among title companies by region.

Seller Fees

  • Real estate commission

  • Prorated property tax

  • Prorated HOA fees

  • Any recording fees to satisfy the deed of trus

  • Fees to pay off mortgage

Buyer Fees

  • Prorated property tax

  • Prorated HOA fees

  • Fees associated with getting the loan

  • Appraisal

  • Fees for closing

  • Title insurance

  • Recording fees for deed and deed of trust

  • Home inspection