From appraisals to points and title insurance, understanding the components of these costs can be challenging. As a result, buyers and sellers often don’t know what to expect when they’re ready to close on their properties.
To demystify closing costs, it’s helpful to look at them from two perspectives: what the seller pays and what the buyer pays. In most cases, the buyer and seller will split the total amount of closing costs between them.
For sellers, closing costs typically include things like commission fees to the real estate agent, transfer taxes, legal fees, and title insurance. There may also be fees associated with making repairs required by the buyer or lender. Depending on the state, local, and city laws, the seller may also be responsible for paying taxes on the proceeds from the sale.
For buyers, closing costs include loan origination fees, title and escrow fees, appraisal fees, points, and survey fees. The buyer is also responsible for pre-paid items, such as a year’s worth of homeowner’s insurance and property tax payments. Additionally, the buyer may be responsible for additional costs that come up during the closing process, such as recording fees and notary fees.
In order to avoid confusion, it’s important that buyers and sellers understand what closing costs are and who is responsible for each cost. Before beginning the closing process, both parties should consult with their real estate agents or attorneys to identify which costs are the responsibility of the seller and the buyer. It’s also important to take the time to review all the documents that detail the different closing costs so that there are no surprises at the closing table.
Closing costs can be confusing for both buyers and sellers. It is important for both to have a thorough understanding of what goes into closing costs and who needs to pay each component. Buyers should be aware of loan origination fees, title and escrow fees, appraisal fees, points, and survey fees as well as any additional costs that may come up during the closing process. Sellers should be prepared to cover commission fees, transfer taxes, legal fees, home repairs required by the buyer or lender, and taxes on the proceeds of the sale. Both parties should consult with their real estate agents or attorneys and make sure to review all of the documents that outline the closing costs to avoid surprises at the closing table.
This article was contributed on Oct 20, 2023