Closing costs might not be the first thing potential buyers think about when they find a home that they’d like to make an offer on; it also might not be something sellers are familiar with. Even though it’s not the most exciting aspect of the home buying process, keeping the closing costs in mind is not to be understated.
In short, closing costs refer to the money that is due at closing which is not part of the initial offer or part of the listing price. However, it’s not always as simple as that. Looking to learn a little more before jumping into the sale or purchase of a home? Here’s all you’ll need to know as either a buyer or seller.
So What Exactly Are They?
As mentioned, closing costs are the fees that must be paid on the day of the sale. These won’t be a set number but a solid estimate to consider is around 5%, give or take a little in either direction depending on where the sale is taking place and what else of the sale you are on. Things like local taxes and the cost of insurance are also going to factor into where exactly the percent falls.
For buyers, it also helps to know that part of these fees is the payment that’s being given to your mortgage lender. Given it’s not a flat rate, it’s always advised to look at a buyer or seller closing costs calculator, obviously depending on which side of the sale you fall on. With that in mind, to be clear there are costs associated with a close for both buyers and sellers. Each is going to look quite different, so here’s what both parties can expect.
On The Buying End
These are going to be the fees related to the loan itself. Keep that in mind as well as the costs of the insurance policy on the house. If there’s any fees associated with the mortgage, that’s going to be on the buyer as well. Ahead of actually signing, as the buyer you should be given a full disclosure of every single cost associated with the loan in its entirety.
Prior to getting to the point of the disclosure, buyers are also going to pay for any appraisal work that’s been done as well as a home inspection. Anything that’s yearly, think of a homeowner’s association fee or property taxes, will be prorated for the rest of the year. That means if you’re moving in during the fall, you are only paying those for the remainder of the year and not the entire calendar year.
For Those Who Are Selling
The good news here is that there are fewer moving parts in getting to the actual point of the sale. What sellers will mostly have to keep in mind is what’s going to the realtor as their commission fee. Typically, that’s going to be that 5% you’ll have to look out for. In a traditional sale, it’s paid by the seller and that number is split between both parties’ realtors.
What else the seller needs to look out for is the fees that come along with transfers for things like taxes, titles, and escrow fees. For those looking to bring in as much money as possible, they can try and go at selling without a realtor but even in a seller’s market it might just be the wiser decision to put it in the hands of a professional to get the process completed as soon as possible.