Every year, around 13-14% of Americans move, and often, these relocations involve the selling and buying of property. If you’re a homeowner yourself, then there’s a good chance that you want to move in the future, which means you’ll need to go through the entire house-selling process.
Unfortunately, it’s not typically straightforward, and it involves several steps, as well as paperwork and fees. Without learning about these things ahead of time, it can quickly become overwhelming.
One question that’s important to answer is this: what do closing costs include? Keep reading to find out all the important details.
Who Pays the Closing Costs?
First of all, let’s discuss who pays the closing costs so you’re clearer on what to expect.
Like many other real estate issues, there’s no straightforward answer here, as it’ll depend on the market, local customs, and the terms you’ve negotiated. In some cases, the buyer pays most of the closing costs, while in others, the seller does.
Here are the common scenarios you may come across.
Closing Costs for the Buyer
This is the most common situation you’ll see in the real estate industry. The buyer will usually pay the majority of the closing costs. This includes fess associated with obtaining a:
- Title insurance
- Home inspection
- Other expenses related to the loan and property transfer
Closing Costs for the Seller
In certain markets, or as part of negotiations, the seller may pay some of the closing costs.
If you’re finding it difficult to attract potential buyers or to get someone to purchase, then this can sweeten the deal. This can help you sell the property quicker.
You’ll also see buyers and sellers share the costs.
This arrangement can be reached through negotiations. The details depend on the specifics of the transaction.
In some situations, lenders may offer to cover some of the closing costs. This is a great incentive to attract borrowers.
However, the downside is that there are slightly higher interest rates and more terms than usual.
What Do Closing Costs Include?
Now that we’ve gone over the details of who pays for real estate closing costs, it’s time to go over what these costs include. As the name indicates, you’ll pay these at the end of the real estate transaction. Factors that impact the values include the location, property value, and the specific agreements made between the buyer and seller.
Do keep in mind that the exact list will vary from sale to sale. However, we’ll cover the common ones below.
Mortgage lenders will charge fees for processing and approving the loan. Within these fees, you’ll find application, origination, and underwriting costs.
These costs are related to the transfer of the property’s title from the seller to the buyer. These fees include title search, title insurance, and title examination costs.
In most cases, lenders will require an appraisal of the property before the sale goes through. This is to determine its actual value.
The buyer usually pays for this appraisal.
Home Inspection Fees
This is another fee typically paid by the buyer, as they’re the ones who want to make sure the home is in good shape before putting money down. The home inspection will assess the property’s condition and identify any potential issues, which the buyer can use to back out or negotiate lower prices.
Escrow is when a neutral third party holds funds during the closing process. These fees cover the services provided by the escrow agent.
The local government needs to record the new deed and other official documents related to the property transaction. So you must pay them for these services.
Some sales require a property survey first, as it ensures that its boundaries are accurately defined. Generally, buyers cover these costs.
This doesn’t always happen, but attorneys are needed in some states or situations. Legal representation may be necessary during the closing process, so fees must be duly paid.
Prepaid Taxes and Insurance
The timing of the closing may involve prepaid taxes and insurance. If this occurs, then the buyer will have to pay these things for a certain period.
How Can I Avoid Closing Costs?
As you can see, there are lots of closing costs involved in the sale of a house, and this list doesn’t even cover everything. The entire process can take weeks or even months, which can add to your stress. So you may be wondering if there are ways to avoid all this.
Luckily, you can bypass closing costs and the long traditional property sale procedure by selling for cash. Companies like First Call Home Buyer will buy your home as-is, meaning you don’t have to renovate, repair, list, stage, or show your home.
Not only does this cut down on costs, but it’ll also save you time. In addition, you don’t have to involve a real estate agent, who will take a commission fee too.
Good Luck Selling Your Home
Now you have detailed information regarding the question, “What do closing costs include?” Depending on your situation, you may have to cover some of them as the seller.
To avoid a long and drawn-out sale, and to save on costs, consider selling for cash instead. You’ll get fast money, and you’ll eliminate significant hassle as well. Plus, it can take a lot off your plate and help you focus more on your upcoming move, which will be welcome during such a stressful time.
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