The Lowdown on Closing Costs
It all depends on the terms of the purchase contract. Most of the time the buyer pays the majority of the closing costs; however, the seller is expected to pay the real estate agent’s commission. Closing can be a confusing process for first-time buyers and sellers. We’ve compiled some points about what you need to know about closing costs when selling your home; namely, who pays…
What Are Closing Costs?
First of all, closing costs are the fees, taxes, and other expenses due on closing day. These usually range from 3% to 5% of the purchase price. Since the seller is already paying the 6% commission to the real estate agent, it’s unlikely that they will be expected to pay for closing costs. It’s rare if a buyer asks the seller to absorb more fees; however, you never know if it’s a buyer’s market at the time. Today’s Raleigh real estate market is a seller’s market and most likely will stay that way in the next year.
Closing costs can include taxes, county fees, lender fees, title fees, and more. Let’s take a deeper dive into what closing costs are.
What the Seller Pays…
The buyer and seller split the closing costs with the buyer paying most of the closing costs. The seller usually covers their end of municipal fees and local taxes. First-time home sellers will benefit from learning about this ahead of time in order to save money on fees they really aren’t expected to pay. That’s why it’s wise to hire an experienced realtor to guide you through closing and watch for pitfalls and hidden fees.
You’ll want to find out who pays the title fee and are closing costs ever split evenly? If the seller opts to pay for repairs through escrowed money, then the seller will need to pay in cash from the profits of the sale or out-of-pocket.
Check out these common closing cost expenses that sellers pay:
- Real estate agent commission
- Seller’s attorney fees
- Title insurance
- Transfer tax
- HOA fees
- Prorated property taxes
- Credits toward closing costs
What Does the Buyer Pay?
Escrow fees are usually split between buyer and seller. An escrow account is a protected savings account overseen by the realtor or lawyer that holds both parties’ money until the property is transferred from seller to buyer upon closing. Escrows are used to safeguard closing costs money before closing.
What buyers pay at closing depends on the type of loan they get. They usually pay mortgage fees which include application fees, discount points, origination points, mortgage insurance, credit report costs, and the mortgage broker fee. Discount points lower the interest rate but end up costing the buyer 1% of the loan for each point. Not much of a “discount,” huh?
Origination fees compensate the mortgage broker or lender. Title insurance is also something a buyer will purchase. This is for their own good because it protects them from title fraud like defects in the title, undisclosed liens, and forged documents. Home insurance is also something that a buyer would pay. Sometimes buyers and sellers split the cost of a homeowner’s policy. In addition to these closing costs, buyers typically pay for property appraisal because most lenders require it.
Now that you have a better idea of what closing costs are and who pays them, you’ll be able to make an informed decision come closing time. If you’re thinking about selling your home and concerned about closing costs and the legalities involved, please consider contacting a property management company like Oak City Properties. We have decades of experience handling closings and helping homeowners sell their homes quickly and with profit.
At Oak City Properties, we have been helping those in the Raleigh area purchase and sell homes for years! Whether you are a family trying to sell your home or a landlord wanting to downsize your rental portfolio, our full-service property management company is here to help.
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