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Who Pays the Closing Costs?
Buyers and sellers in the housing market have many fees to consider when purchasing and selling a home. One of the costs, closing fees, can be confusing to understand who pays for the fee. Learn more about closing costs when buying or selling a property.
Buyer Costs
Closing fees can be present for both buyers and sellers. Typically, the buyer is faced with more line-item expenses than the seller (who typically pay more). Most buyers are getting loans to make the purchase of a home and many charges stem from the loan itself. A buyer should receive something called a loan estimate form early on in the sale process. The document spells out all approximate costs a buyer will face when making the purchase of a home so there are no surprises at closing. Some buyers may use the information on the loan estimate to shop for different lenders, interest rates and costs.
Buyers getting a loan will see some of the following costs:
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Appraisal fee
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Origination fee
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Prepaid interest
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Prepaid insurance
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Flood certification fee
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Tax servicing fee
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Credit report fee
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Bank processing fee
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Recording fee
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Notary fee
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Title insurance
It is prudent to go through all listed fees line by line with the mortgage professional to understand what the fees include and how they apply to the loan. Aside from expenses of getting a loan or buying a home, some expenses (such as property taxes or HOA fees) are pro-rated and paid at the time of closing. If an individual is buying a home and closes toward the end of the property tax period, it is likely the person will need to pay the balance of taxes upfront. This also includes prepaid loan interest. If a person closes toward the end of the month, the lender may ask for first month's payment up front.
Negotiate Sharing Costs
Part of the negotiation on a home sale can include asking the seller to pick up some of the closing costs as part of the negotiation. Credit for $5,000 reduction in purchase price can save a fair bit of money in the closing costs up front, even if it only saves a little bit monthly over the life of the loan.
Sellers Commission
The seller will usually bear the biggest brunt of fees: the real estate commission. Commission is based on a percentage of total sale price. In addition to real estate commission, sellers may have to pay the balance of property taxes, if it has not already been done, as well as any prorated homeowners association dues.
It can pay big dividends to pay attention to closing costs so as not to get charged fees which can be negotiated or lowered. Any real estate agent will be happy to work with individuals and families on home closing paperwork to provide the most for overall satisfaction.
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