Understanding the Landscape
Closing costs encompass a range of fees associated with the finalization of your real estate transaction. Some of these costs are paid up front, some are optional, some are negotiable, and some are set.
Loan-Related Costs
For those securing a loan, there are additional expenses to navigate. Loan origination fees, loan title policies, appraisals, credit reports, prepaid interest, document preparation, recording fees, initial deposits for escrow accounts, and mortgage insurance premiums can all play a role. Some of these are negotiable! It’s a good idea to contact several lenders to ask about the costs and fees associated with their mortgage loans. Taking the time to compare these fees can save you thousands of dollars!
Buyer’s Costs
Property inspections, including specific inspections for septic systems, termites, or lead based paint, are optional, but they're a good idea and part of a buyer’s due diligence, to ensure the property's integrity. Costs for these inspections are usually paid up front and out of pocket by the buyer. The survey is another common upfront buyer cost, although this is negotiable in the contract. A current survey ensures the property’s boundaries are well-defined, and it is required by title before closing. Additionally, you might encounter Homeowners Association (HOA) transfer fees. You will definitely pay prorated taxes, half of the escrow fee, courier fees, and hazard insurance.
Seller's Costs
Sellers bear the burden of paying off their own existing loans on the property and any other liens on the property such as the cost of solar panel installation. The seller often pays realtor commissions (although that is negotiable) along with owner's title policies, and endorsements. Other negotiable expenses include survey costs and home repairs, or home warranties as described in the contract. Set costs include prorated taxes up to the day of closing, half of the escrow fee, courier fees, tax certificates, document preparation, recording fees, and possibly an HOA resale certificate.
