Buying or selling a property isn’t as simple as just handing over or receiving the asking price. (If only.)
There are a few more fees to deal with in addition to the home’s purchase price. These are what we call closing costs – aka all the fees and expenses needed to officially seal the deal.
But why do you actually need to pay these fees? Can’t you just move into your new home (or hand over the keys) without all this rain on your real estate parade?
Well, closing costs might be annoying, but trust us – they are essential. They cover all those behind-the-scenes tasks that make sure the deal is legally finalized. And honestly, paying that little extra now is absolutely worth avoiding major legal disputes later on, are we right?
But who’s picking up the tab? Stick with us as we run through the main closing costs in real estate transactions and what you’re responsible for paying as the buyer or as the seller.
Who Pays Real Estate Closing Costs?
Here’s the thing: there’s a lot (and we mean a lot) of different closing costs. The buyer is responsible for footing most of these bills. But not all of them. Sellers have their share of costs, too, and sometimes, both parties chip in on the same bill.
In Florida, buyers and sellers typically have specific closing costs to pay, but this can vary depending on the contract and other factors like the county they’re located. It’s a good idea to consult with your realtor about which costs you need to cover.
Buyer Closing Costs
- Credit report fee: The cost of analyzing your credit score (needed to get your loan approved).
- Underwriting fee: The money your lender gets to review your finances (and give your loan the green light).
- Origination fee: The lender’s processing fee on your new mortgage loan.
- Appraisal fee: The cost of checking if the home matches the price tag.
- Survey fee: You’ll need to pay this to confirm your property’s boundaries.
- Pest inspection: Making sure your home doesn’t have any unwanted house guests. Totally worth it, if you ask us!
- Flood check fee: You’ll need to pay this to find out if you’re in a flood zone.
- Escrow deposit: Cash set aside in an escrow account to cover future property taxes and homeowners insurance.
- Title insurance (sometimes): A safeguard against any surprise ownership claims, disputes, or errors.
- Prepaid interest: Covers the loan interest between closing and your first mortgage payment.
- Agent commission: Usually 5-6% of the home’s sale price (split between your real estate agent and your seller’s agent).
Seller Closing Costs
- Attorney fees: The cost of the legal help you’ll need with contracts and paperwork.
- Title insurance: Insurance coverage to give your buyer a clean title.
- Repairs and concessions: If problems show up during the inspection, you might need to pay for repairs or offer the buyer a credit to cover them.
- Property taxes: Unpaid property taxes that need to be handled before signing on the dotted line.
- Outstanding HOA fees: Any homeowners association dues you’ll need to settle up.
- Transfer tax: Needs to be paid when handing over the keys to your buyer.
- Agent commission: Usually 5-6% of the home’s sale price (split between your agent and your buyer’s agent).
Important: This is just a general guide. Who pays what can change depending on local customs, state laws, and what’s in your contract. Give your paperwork a good read through and do a bit of homework to make sure you know exactly what you’re on the hook for – and avoid any shocks later!
How Much Do Closing Fees Cost?
Ahh, the big question! Unfortunately, there’s no black and white answer, because costs vary depending on the property’s value and location. That said, the average closing costs for a single-family home in the US are $6,905 (including transfer taxes) or $3,860 (excluding taxes).
Usually, when a buyer or seller pays closing costs, you can expect them to fall somewhere between 2-5% of the home’s price. So, let’s say you’re buying a $250,000 home. You can expect to pay somewhere between $5,000 and $12,500 in closing costs.
How Does Title Insurance Impact Closing Costs?
Title insurance is one of the most important closing costs for both buyers and sellers.
For buyers, it keeps you safe from surprises like hidden debts or distant relatives popping up to claim they own part of the property. For sellers, it clears up any lingering title issues – like unpaid liens or boundary disputes with grumpy neighbors – before they get out of hand.
In the US, the buyer usually foots the bill for title insurance but there are some exceptions to the rule. In the state of Florida, for example, it’s the seller who generally covers the title insurance bill (except for a small number of counties where the buyer is responsible). Once again, it all depends on local laws and what’s written in your contract!
And if you’re wondering how much title insurance will set you back, it usually costs about 0.67% of the property’s sale price. So, for a $300,000 home, you’re looking at about $2,010 for title insurance.
How to Estimate and Prepare for Closing Costs Ahead of Time
A little preparation goes a long way in helping you budget for closing costs before you buy. Here’s what to do:
- Use a closing cost calculator: A ballpark estimate of your closing costs is great to have in advance. Luckily, many financial and real estate websites have handy calculators available for free to help you figure this out.
- Ask your agent or lender: Your agent or lender can give you an even more accurate estimate, since they know the fees that apply in your area and can break down what you’ll owe.
- Factor in additional costs: Don’t forget, you might have to pay property taxes, homeowners insurance, and possible repairs needed after the home inspection. These can get pricey!
- Save ahead: Once you have a rough estimate of closing costs, you can start saving. Start putting some money aside today so you don’t have to worry about getting it together all at once during closing.
- Check the closing disclosure: Before signing on the dotted line, you’ll get a Closing Disclosure with a breakdown of all your costs. Go through it carefully to make sure you’ve got it all covered.
Get Title Insurance You Can Depend on with Brick City Title
Whether you’re the buyer or the seller of a property, the Bricky City Title team will set you up with title insurance and support you through the closing process.
How do we do this? By making sure your legal rights are protected, your paperwork is in order, and your deal goes through with no last-minute drama (liens, disputes, etc.).
Book a call with us today to find out more about how we can help.
