Closing costs on a real estate transaction can sometime be tricky, deciding who pays for what. With lenders and financing playing such a big part in the home buying process you’ll want to know everything you can about the closing costs in your real estate transactions. When buying a home, buyers are often surprised at all the little fees that are incurred and required to close on a traditional real estate purchase. It’s a good idea to have your Realtor provide you with an estimate closing costs statement which although not 100% accurate will give you a pretty close idea to what it will cost you in fees to but the home.
There are a lot of closing costs involved in closing a real estate purchase regardless if you’re the buyer or the seller. From lender fees to taxes and interest to escrow fees just to barely scratch the surface. Many of these fees vary by the purchase price but many are also fixed like notary fees. Depending on the motivation of the seller, buyers may find themselves successful in negotiation asking for their closing costs to be paid. Buyers looking to get into a property with little to no money down will greatly benefit from an experienced Realtors negotiation strategy that includes this tactic.
The True Costs of Closing Costs
One of the fees buyers often forget about is property taxes. We are often asked why am I paying property taxes already, I just bought the house. That’s true but taxes are paid in different times throughout the year and depending on when you close you may pay a little or a lot. Taxes are always pro-rated and as a buyer you will always pay something. For instance if you’re buying a home in January and taxes are due in April then the seller has probably already paid the taxes through March, the seller will receive a credit for what was paid and the buyer will incur that debit thus refunding money to the seller and the new buyer paying the taxes through March.
If you’re buying a home and obtaining a loan then you will also be paying closing costs to obtain that loan. After all, banks don’t loan money for free, right? When obtaining a loan a lender might charge things like points, this is the cost for the lender to do the loan. Additional items that might be included in closing costs are courier fees and wire transfer costs just to name a few. The goof part is that your lender will provide a Good Faith Estimate or GFE to you shortly after you apply for the loan. The GFE will give you a cost break-down of the fees the lender is charging you to do the loan.
Another item to consider depending on where you’re buying your home is whether a home owners association or HOA is present. If the property your purchasing is in a HOA then you might also incur addition fees for transfer of the HOA.