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What do buyers and sellers pay for closing costs?

Buyers and sellers often overlook the impact of the closing costs on a property.  Some closing costs are associated with the loan application, while other costs, such as the appraisal, relate to the home.

Closing costs for buyers may include:

  • Fees charged for obtaining a mortgage.
  • The cost of a home inspection.
  • Homeowner’s insurance.
  • Title insurance and settlement fees.
  • Property taxes.
  • Transfer taxes.

Closing costs for sellers:

Sellers are typically expected to pay a lot of costs associated with the transaction.  Buyers are usually not sympathetic to the problems that sellers face.  Some of the seller costs include:

  • The loan payoff costs, including prepayment penalty fees, if applicable.
  • Real estate commissions to agents and brokerages are based on a percentage of the sales price.
  • Transfer taxes.
  • Recording fees.
  • Title insurance.
  • Notary fees if applicable.
  • Attorney or title company fees.
  • Any judgments.
  • Any liens.
  • Any unpaid HOA (homeowner association) dues and the association dues up to the settlement date in some cases.
  • The property taxes up to the settlement date (prorated).

Depending on the contract, the seller could also have to pay at closing:

  • A termite inspection and the remediation if it’s necessary and agreed upon by the buyer and seller.
  • The Home warranty policy if agreed upon in the contract.
  • Repair costs or a credit for the repairs for findings during a home inspection.
  • Buyer closing costs if agreed upon in the contract.

After a ratified contract to sell the home has been reached, the sellers remain responsible for the ongoing costs, such as mortgage payments, property maintenance, property taxes, and HOA dues, until the property officially becomes the buyers’ after settlement. If the home inspector finds problems with a property, the buyer and seller may negotiate a credit to be paid to the buyer at closing in lieu of making the repairs.

Factor in the closing costs when you calculate the price of the real estate transaction to ensure you are financially prepared for them. Being well prepared will prevent an unpleasant surprise at settlement.

Closing costs example for both buyers and sellers

Selling price: $139,000
$5000 towards the buyers closing costs
Home Warranty: $515.00
Annual taxes: $1,208.64

Seller Closing Fee’s ExampleBuyer Closing Fee’s Example
Seller Fees:  $375 Signing Fee: $75 Home Warranty: $515 Closing Cost: $5000 Termite: $75 (if required) HOA: $275 Well/Septic or Public Water and Sewer: $ Grantor Tax:  $139 or .1% of the assessed value Tax proration’s:  $3.31 per day to the date of closing.      Closing Fee: $625 Signing Fee: $140 Title Insurance: $693 (includes owners title policy) County/State Fees: $0 HOA: $0 Recording Fee:        $99 Transfer Tax:           $927.29 Real Estate Taxes:  $403.82 Home Warranty:    $515.00   Total:                         $3918.11 Closing Costs:          -$50000.00   Leftover to cover Lender costs:           $1081.89   If there is an HOA, there could be more costs involved  

This will provide a good example of what it will cost to sell or purchase a home.

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