The sort answer: It depends.
The long answer: Closing Costs are made up of several factors, and are very very difficult to predict with absolute accuracy. Many different things go into the closing, some are items that agents don’t even know about! Let’s take a look at some common closing costs. Some you will already know and expect, others that seem to pop up at the last minute.
- SELLER- The seller usually pays the Real Estate Commission. This is negotiated between the seller and the listing agent when the house is listed. There is usually a $5 fee that goes to the Title Insurance Enforcement Fund, $75 for deed preparation, and $25 wire fee. Sometimes the seller will agree to pay for a Home Warranty, these usually cost around $400 at closing. Sometimes they owe money to the utility company that has to be paid at closing. Sometimes there is a “transfer fee*” for the HOA (see comments later about this one). Any late HOA fees will also need to be paid at this time. The seller might see “Attorney’s fee” or “closing fee” which is usually about $150. A larger fee that the sellers will have to pay is the taxes. In Indiana we pay our taxes in arrears, so the seller has to give money to the buyer for the taxes. These are pro-rated to the day of closing and can vary widely. The seller usually pays the “Owner’s Title Policy”, a fee which changes according to the price of the home. Finally, and closing costs that the seller has agreed to pay for the buyer.
- BUYER- The buyer is given a list of fees by their lender before closing, a “Good Faith Estimate” that shows several of the fees associated with the loan. These might include the origiantion fee, points, credit report fee, and appraisal. Sometimes you must pay for the appraisal up front, sometimes it is paid for at closing. The lender also can set up an escrow account for the buyer to pay the insurance and taxes, in which case they will need to pre-pay a few months of those fees. You might also see a payment to the insurance company to get the insurance going, or sometimes the insurance company will have you pay them up front. Of course, your home insurance depends on the home and the items you own. If you have a down payment less that 20% you may see a fee for Mortgage Insurance. This is different from your homeowner’s insurance. The buyer usually pays the “Lender’s Title Insurance”, which varies. Recording fees around $100, transfer fee for the HOA*, and that good old Title Insurance Enforecement Fund fee of $5. Sometimes, if the seller has already paid the HOA for the full year, the buyer will need to reimbuse the seller. The seller also has to pay for their Home Inspection (at the time of inspection) and they get the credit for their taxes.
Confusing enough for you? **About that HOA transfer fee.** This is something that as an industry, we kinda stink at. There is no place on any form to disclose it, and we generally have no idea how much this is going to be until we are sitting at the closing table. In most cases, the fee is $25-$100, sometimes it is split between buyer and seller, sometimes it is charged to just one side. In a recent transaction, the fee was $500 and was going to be charged to my buyer. Nobody told her up front about this fee, and it was so high that she could not (and would not) pay it. I don’t really blame her. I know now to check with the HOA before the offer is made to see what that fee is (if they charge).
With interest rates going lower and lower almost every day, many people have taken the chance to refinance their mortgage. If (for example) you are locked into a 7% or higher interest rate, and the interest rates fall to 5%, you might want to refinance your mortgage for lower payments.
