If you’re considering buying or selling a property, you’re likely to hear the term “closing costs.”
Closing costs are expenses that are incurred by both the buyer and seller during a real estate transaction. They are separate from the purchase price of the property and can vary depending on the location, type of property, and other factors. Here’s what you should know about closing costs:
What are Closing Costs?
These are expenses that are incurred when a real estate transaction is completed, i.e., when the property changes ownership. Both the buyer and seller have to pay some closing costs. Although the expenses can differ depending on the terms of the sale.
The closing process involves several steps that require various services, such as title searches, appraisals, home inspections, and legal fees. Some of these costs may be paid before closing, such as the deposit or earnest money, which is usually a small percentage of the sale price paid by the buyer as a good faith deposit. However, most of the other costs are paid at the closing, which is the final step of the process.
What Do Closing Costs Include?
It can vary depending on the location, type of property, and other factors. However, here are some of the most common expenses that are included in closing costs:
Title Search and Insurance
Before a property can be sold, a title search must be conducted to ensure that the property has a clear title. Which means that there are no liens or other encumbrances on the property. Title insurance is also typically purchased by the buyer to protect against any undiscovered issues that may arise after the sale.
Appraisal and Inspection Fees
The buyer typically pays for a home appraisal to determine the property’s value and for a home inspection to identify any potential issues with the property’s condition.
Loan Costs
If the buyer is obtaining a mortgage, there will be fees associated with the loan. Such as an origination fee, application fee, and appraisal fee.
Transfer Taxes and Recording Fees
The local government charges fees to transfer the property title and record the transaction, which is typically paid by the buyer.
Escrow Fees
An escrow company may be used to handle the transaction and ensure that all parties receive the funds they are entitled to. The company will charge a fee for their services.
How Much are Closing Costs?
It can vary significantly depending on the property, the location, and other factors. However, as a rule of thumb, it can range from 2% to 5% of the sale price of the property. For example, if the sale price of a property is $200,000, then it could be between $4,000 and $10,000.
Who Pays for Closing Costs?
In most cases, both the buyer and seller will pay closing costs. However, the specific terms of the transaction will determine who pays for what. For example, in some cases, the seller may agree to pay for some of the buyer’s closing costs to make the property more attractive to potential buyers.
Conclusion
When it comes to buying or selling a property, closing costs are an expense that cannot be avoided. However, The JDRE Team can help you navigate these costs and avoid any unexpected surprises during the closing process. The JDRE Team can provide valuable insights on what closing costs typically include and help you prepare for them. So if you’re planning to buy or sell a property, it’s important to enlist the help of The JDRE Team to guide you through the process and ensure a smooth transaction.