Typical Seller Closing Costs
There
are a number of details that still need to be
completed after you have accepted an offer on
your property. There will probably be a whole
house inspection of your home by an inspector
who will determine the condition and integrity
of your property. The buyer's mortgage company
may chose to send out an appraiser who will assure
the lender of your property's worth. The title
company will warranty that there are no liens
or existing encumbrances which would inhibit a
transfer of title to the buyer. Either you or
the buyer may chose to be represented by an attorney.
The fees associated with the buying or selling
of a home are called closing costs. Certain fees
are automatically assigned to either the buyer
or the seller; other costs are either negotiable
or dictated by local custom.
Seller Closing Costs
If the seller has not yet paid for the house in
full, the seller's most important closing cost
is satisfying the remaining balance of their loan.
Before the date of closing, the escrow officer
will contact the seller's lender to verify the
amount needed to close out the loan. Then, along
with any other fees, the original loan will be
paid for at the closing before the seller receives
any proceeds from the sale. Other seller closing
costs can include:
| • |
Transfer
taxes |
| • |
Documentary
Stamps on the Deed |
| • |
Title
insurance |
| • |
Property
taxes (prorated) |
| • |
Broker's
commission |
| • |
Negotiating
Closing Costs |
In addition to the sales price, buyers and sellers
frequently include closing costs in their negotiations.
This can be for both major and minor fees. For
example, if a buyer is particularly nervous about
the condition of the plumbing, the seller may
agree to pay for the house inspection.
Likewise, a buyer may want to save on up-front
expenditures, and so agree to pay the seller's
full asking price in return for the seller paying
all the allowable closing costs. There's no right
or wrong way to negotiate closing costs; just
be sure all the terms are written down on the
purchase agreement.
Prorations
At the closing, certain costs are often prorated
(or distributed) between buyer and seller. The
most common prorations are for property taxes.
This is because property taxes are typically paid
at the end of the year for which they were assessed.
Thus, if a house is sold in June, the sellers
will have lived in the house for half the year,
but the bill for the taxes won't come due until
the following year! To make this situation more
equitable, the taxes are prorated. In this example,
the sellers will credit the buyers for half the
taxes at closing.
Buyer Closing Costs
When a buyer applies for a loan, lenders are required
to provide them with a good-faith estimate of
their closing costs. The fees vary according to
several factors, including the type of loan they
applied for and the terms of the purchase agreement.
Likewise, some of the closing costs, especially
those associated with the loan application, are
actually paid in advance. Some typical buyer closing
costs include:
| • |
Down
payment |
| • |
Loan
fees (points, application fee, credit report)
|
| • |
Prepaid
interest |
| • |
Inspection
fees |
| • |
Appraisal
|
| • |
Mortgage
insurance |
| • |
Hazard
insurance |
| • |
Title
insurance |
| • |
Documentary
stamps on the note |
|
