When you buy or sell a home, one common question you may have is “How much are closing costs going to be?” Furthermore, you might be wondering who is going to be responsible for paying these costs. These are both important questions–especially when you’re trying to sell a home. Read on to find out what goes into closing costs in, how much they typically cost, and what you can do to reduce your closing cost burden.
What Goes Into Closing Costs?
When you close on a home, there’s a lot of work that needs to be done by outside professionals. For example, your lender needs to write your loan agreement out in addition to running your credit report; this costs money. You need an expert to conduct a final appraisal on the home itself; that costs money. You get the idea.
In addition to these, here are some other expenses that typically factor into closing costs on a home:
- title search fees
- discount points
- attorney’s fees
- recording fees
- underwriting fees
It’s no surprise, then, that closing costs on a home can easily total several thousand dollars.
What Are Typical Closing Costs?
Generally, closing costs will total anywhere between 2.5% and 5% of the sale price of the home. Usually, that number is closer to 2.5%, but there are some factors that can increase it, such as needing to have a pest inspection report done before selling the home. These fees can increase substantially if you involve real estate agents who typically charge between 6 and 7% of the final price on top of the other closing costs.
This means that, if you buy or sell a $200,000 home, you’ll be expected to pay about $5,000 in closing costs, plus another $14,000 in agent fees. The buyer of the home can typically get a better idea of what closing costs will be by speaking to their lender, who is required to provide all buyers with a good-faith estimate of these costs.
Furthermore, closing costs can vary from lender to lender; therefore, if closing costs seem too high on one loan, home buyers always have the option of shopping around for another loan that will offer them the same (or similar) terms, but with lower closing costs.
Closing costs also vary greatly from state to state and even city to city. Here are typical cost where we buy house in the Virginia Beach, Norfolk and Chesapeake area:
- Deed Preparation / Settlement Fee – $250
- Grantor’s Tax – $1.00 / $1,000 of sales price or assessed value, whichever is larger.
- Listing Broker Fee – 3% of sale price
- Selling Broker Fee – 3% of sale price
- Release Fee to City – $181 per deed of trust
- Loan Balance on Seller 1st Deed of Trust – Loan balance
- One Month’s Interest on Seller 1st Deed of Trust – Varies by interest rate
- Pre-payment penalty – varies
- Loan Balance on Sellers 2nd Deed of Trust/Equity Line – Loan balance
- One Month’s Interest on Seller’s 2nd Deed of Trust/Equity Line – Varies by interest rate
- Proration of Taxes – Calculate the average of three months taxes
- Storm Water Tax – $30
- Home Owners Association/Condo Dues – Varies by association
- Condo Resale Certificate – $250
- Home Owners Association Resale Certificate – $250
- Tax Service Fee/Commitment Fee – $99
- Buyer’s Closing Costs Paid by Seller – Varies per loan
- Home Warranty – $400
- Well and Septic Inspections – $200 each
- Miscellaneous Repairs – Typically 1% of sales price
- Miscellaneous Lender Fees – $250
- Wood Destroying Insect and Moisture Inspection – $100
Who Pays Closing Costs?
Generally, it is the person who takes out the mortgage on the home (the buyer) who is responsible for paying closing costs. However, it is not uncommon for a buyer to request, as part of the sale agreement, that the seller pay a portion or even all of the closing costs related to the sale. This is especially common with first-time buyers, who may not have the money saved up to cover both a down payment and closing costs on a home.
On the bright side, sellers who decide to sell their homes to a real estate investor can generally have the closing costs of the home with no problems. This saves home sellers a great deal of stress, hassle, and back-and-forth negotiations (not to mention…money). Furthermore, when homeowners sell directly to a real estate investor, they no longer have to worry about whether or not the buyer will be able to secure financing or whether the deal will fall through.
A cash sale to a real estate investor is hands-down the easiest way to sell a home and the quickest way, as well. Not to mention, it can save you from having to pay closing costs on the sale, which could save you thousands of dollars easily. This is especially true at ChristianBuysHouse.com when we buy houses in Virginia Beach, Norfolk and Chesapeake. In most cases, after the loan balance is paid off, home sellers don’t pay a penny in closing costs.
As you can see, there’s a lot that goes into determining how much are closing costs on a home and who pays these costs. If you’re interested in avoiding closing costs altogether on the sale of your Hampton Roads home, we invite you to contact us today so we can get started on making you an offer.