If you’re selling or buying a house, you need to understand some of the things before starting the sale, including closing costs. Ask how much are closing costs? Typically, closing costs for mortgages run at 2% and 5% of the loan cost. This figure includes insurance, property taxes, and many other expenses.
The exact figure of the closing costs will depend on the price of the home and where it’s located. When calculating the amount you’ll make on a home sale, don’t forget to calculate the closing costs. It’s essential to have this figure in order to know what will be deducted from your money at the end of the sale.
What Are Closing Costs
Closing costs are fees that both the home seller and the buyer pay for a real estate transaction. The costs range from 2% to 5% of the sale price on the buyers’ side, and 8% to 10% on the seller’s side. As a home seller, you may choose to relieve your buyer of the heavy burden of closing a house by covering the commission for both agents.
A home seller gets closing costs from the profit they make on the sale. If you have low equity, you’ll have to bring in some cash to cover your closing expenses. The closing costs for a seller may also vary widely because every state has its fees and legal requirements for a home sale.
How Much Are Closing Costs
Both buyers and sellers pay the closing costs, but the payments are not the same.
Buyer’s Closing Costs
If your mortgage is $200,000, you’ll pay around $4,000 to $10,000 in closing costs plus the down payment. The closing costs when buying a home will be divided into property-related fees and mortgage-related fees. The fees will also vary with the location and value of the house. If you don’t understand anything, consult with your lender and go throw every document carefully.
Seller’s Closing Costs
Average closing costs for sellers go up to 10% of the sale price of the home. They might be higher than the buyer’s closing costs because the sellers will also cover the cost of property listings and the agent’s commission. There are also fees and taxes of the seller, which adds 2% to 4% of the total sale price. Sellers rarely need to bring any cash into the closing cost because the amount is deducted from the sale proceeds.
Who Pays Closing Costs and What’s Included?
So who pays closing costs, buyer or seller? Both the buyer and the seller pay closing costs. But sometimes, the seller may pay the closing costs on behalf of the buyer. Closing costs include any upfront fee made for the purchase of a house or a home refinance. However, this amount doesn’t include any down payment.
There are a lot of expenses included in the closing costs. Here are the main fees both buyer and seller should be aware of.
Real Estate Agent Commission
The seller pays for the agent commission, which costs between 4% and 6%. You can still negotiate this fee with the listing agent. The seller may also pay the buyer’s agent commission, which usually costs between 2% and 3% of the home sale amount.
Transfer tax is also known as title fee. It involves the fees paid to pass the title of the home from the seller to the buyer. The cost of this varies by state.
Lenders send an expert to search the titles of a local property to determine its existence. This ascertains that the home they’re going to issue a mortgage for is not under any liens, and the title has no pending court disputes. Title search costs the home buyer around $450.
Owner's Title Insurance
Title insurance protects the buyer from any issues that may arise with the title. These issues may include liens or property disputes. This fee will cover the financial burden that comes with such issues. The home sellers cover this cost, and it can range from $1,000 to $4,000. The policy rate for this is usually lower.
This fee pays the licensed professionals who estimate the value of the home before offering a mortgage. A single-family home will cost an appraisal closing costs of about $300 to $450 and more for larger homes.
Home Inspection Fees
A buyer needs to inspect a home they intend to buy and ensure they’re in good condition. This is separate from home appraisal and will cost the buyer a few hundred dollars.
Escrow and Closing Fees
You can either pay a flat fee or around 1% of the home sale price to escrow providers. The amount includes signing and recording of closing documents, holding purchase funds, and the title deed. This can also include additional expenses such as office fees, copying documents, notary charges, and fund transfers.
These are also called administrative or processing fees. It is the cost for evaluating and verifying mortgages. The fee takes 0.5% of the loan amount and is paid by the buyer. The fees may also include charges like upfront and points.
The settlement fee is paid to the title agent or escrow to handle closing expenses. If the home sale and buying process involves the services of an attorney, this money will be called attorney fees. It can be about $150 to $500 for attorney fees and $2 per $1000 of the settlement fees.
Other fees that make up part of the closing costs for sellers and buyers include;
- HOA fees
- Credit towards closing costs
- Prorated property taxes
- Credit report fees
- Survey fee
- The mortgage payment and prepayment penalty
- Transfer taxes and recording fees
- Outstanding amounts owed to the property
Calculating the Closing Costs
With all the fees involved and several items for the buyer and the seller to pay, calculating closing costs is no doubt complicated. If you’re doing this for the first time, you must get an expert to help. Now that you know who pays closing costs when selling a house, it’s important to understand the exact amount.
To calculate the closing costs, you must first understand that the costs depend on several factors. This includes the state where you reside and the property’s value. Fees such as title fees, commission rates, and loan payoffs can also vary widely.
You need a home sale calculator to help you come up with a definite answer on how much closing costs you’ll need to pay. The calculator should include things like repairs, moving costs, and agent fees.
Can You Avoid Some Closing Costs?
You cannot avoid paying closing costs altogether, but there are several things that you can negotiate to save some money on home sale fees. Compare fees among lenders before proceeding. Understand that many of the fees are not fixed, and lenders can adjust if you negotiate. If you don’t understand anything included in the fees, feel free to ask the lender to clarify.
Many things go into the closing costs, which means you’ll have to deal with lots of paperwork. For a buyer, you must pay good attention to documents such as closing disclosure and Loan estimate. It’s also important to understand that the seller can pay the buyer’s closing costs depending on the agreement you two have. You’ll get the answer to how much are closing costs after you do your calculations right.
The best ways to keep your closing costs down are to work with an experienced real estate agent who knows how to handle negotiation. With SimpleShowing, buyers qualify for our Buyer Refund which can contribute $5,000 on average towards your closing costs.For many buyers, that would be enough to cover most – if not all – of their closing costs.
To find out more about how we’re helping sellers keep closing costs down, please contact us today to connect with one of our agents.