What are Closing Costs?

Home buying and selling is a daunting task. With the biggest transaction some of us will ever experience, it is good to understand closing costs. Once a deal has been made between buyer and seller, the real work begins. Who gets paid what and who covers the costs?

Pest Inspection-

Typically paid by the seller (also negotiable), it can be anywhere from $250 – $500. It will be paid BEFORE closing, but will be documented on your contract as a fee.

Pest inspections are for rodents, termites or other varmints that could potentially cause damage to a property. The bank wants to make sure that before they lend a buyer money for a home there aren’t any unexplored factors that could make a home lose equity.

Agent Commissions-

Each home sale will have a 2 part commission structure, yet both parts will be paid by Seller. Typically there is 3% to the buyer’s agent and 3% to the seller’s agent. This totals out to 6% of the homes sales price. Now something a lot of home sellers aren’t aware of, is that there are brokerages that are offering to sell your home for less than 3%. That could mean around $8,000 dollars in savings at the closing table. THATS A CAR!

ilisthomes.com will list, sell and close on your home for only .5% in commission fees. That is thousands saved at the closing table!

Survey

Most lenders require this document for you to be approved to buy a home. As a seller its always great to keep this document to hand over when you sell to eliminate the cost needed to get another one. The survey cost can be paid by either buyer or seller. Typically to get a copy of this is $425-500!

Escrow Fees

These fees are given to a third party, such as an escrow company that will hold and regulate payment of the funds making the transaction legal and secure. Escrow accounts are used for large purchases and transactions that involve legal obligations to be met before a transfer of funds. Buyers and sellers are both required to pay 1/2 of this fee. Each state has a different calculation they use to determine this cost, but typically its around $500 – $700 for each party.

Title Insurance

This is a two part fee as well, also based on Lender’s requirements. Each state will have a different calculation for the amount to be paid.  The Seller will pay Owners Title Insurance and then the Buyers pay for the Lenders title insurance.

Home Warranty Fee

This fee is an add on really, typically paid by Seller. This usually sits around $450 – $500 and is a basic warranty for the new home owner. The warranty will cover repairs, appliance replacements and sometimes even water heaters and A.C units.

Property Taxes

This fee will usually be a prepaid amount of 6 months of county taxes paid by buyer. Of course taxes fluctuate year to year, so it will be based of the previous years tax assessment value.

Loan Payments

Both seller and buyer will have payments due on loan at closing if either party has borrowed funds. Basically both parties will be required to cover the interest during their transaction period. So even though funds have not been transferred even buyer will have to pay interest on new loan from date of funding to 30 days prior to first payment will be due at closing.

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