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Closing Costs

Closing costs, or the fees associated with buying and selling real estate property, can be divided into three basic categories; lender fees, prepaid and settlement costs. 

Lender fees may include points, appraisal, credit reporting, underwriting, settlement and tax service fees.  Prepaid fees may include interim interest, real estate taxes and escrow, and insurance premiums and escrow.  Settlement fees may include title insurance, settlement or attorney fees, taxes, recordation and messenger fees.

As with many elements of a real estate transaction, closing costs are negotiable.  They can be paid by the buyer, the seller or any combination of these two parties.

Some of the more common types of closing costs are described below, although many other types of costs can come into play.  Closing costs are individual to a piece of property, and hence will differ according to region, property type, and numerous other factors.  As always, it is important to discuss closing costs with your agent and lender in order to be fully informed regarding your particular situation.

Commission fees may be paid to real estate agents representing the buyer and seller of a piece of property.  Property taxes must also be paid by the seller (usually), until the last day of ownership.  A new homeowner's insurance policy must also be purchased, usually by the buyer.  Any assessments or liens on the property in question should be taken care of prior to the close of escrow, and are usually paid for by the seller.

Escrow services and title insurance must also be settled.  Other fees may include, but are not limited to, property inspection fees, termite inspection, termite removal, document preparation fees, deed recording fees, loan assumption charges, home warranty and utility adjustments.

Closing costs for sellers usually comes down to commissions plus approximately 2% of the sales price of the property.  For buyers, closing costs usually amount to 3% of the sales price.

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