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Who Pays Closing Costs: Buyer Or Seller?

Between all of the different fees involved in a real estate transaction—including the down payment, renovation costs and the purchase price—it’s easy to overlook the closing costs. Before the home is sold, both the buyer and seller must pay for the closing costs, and the price depends on a few factors. 

What Are Closing Costs?

Closing costs are the fees that are involved with purchasing a home, such as attorney fees, mortgage fees and appraisals. There is no set amount that everyone must pay, but generally, sellers can expect to pay about 6 to 10 percent of a home’s overall purchase price. Buyers will pay a bit less, typically 2 to 5 percent of the sale price. A seller’s closing costs are usually deducted from the proceeds of the sale, while buyers will pay out of pocket for their fees.

The issue is that you likely won’t know what the final costs are until about three days prior to closing, when you will receive a closing statement. Sellers typically receive an earlier notification via their agent, who provides a seller’s net sheet that outlines all of the costs and the final sale price. 

Closing Costs for Sellers

Sellers have different closing costs than the buyer. Unless you request to pay the costs separately, the following expenses are deducted from the home’s sale price:

  • Realtor Commissions. Realtors receive a commission for the home that is sold. Sellers usually pay the commissions for their own agent as well as the buyer’s, and this is taken as a percentage of the sale price. 
  • Title Transfer Fees. These are the fees for transferring a home’s title to the buyer. 
  • HOA Fees. If applicable, any remaining homeowner’s association (HOA) fees should be paid for when the home is closed. 
  • Property Taxes. The seller will owe the amount of any outstanding property taxes for the home, and these are due upon closing. 

Closing Costs for Buyers

Buyers are typically responsible for paying the costs listed below at the time of closing. Most are related to securing a home loan and are included in your mortgage. 

  • Attorney Fees. Your real estate attorney handles many critical steps in the process. You will owe them certain costs alongside an hourly fee. 
  • Home Inspection Costs. If you decide to complete a home inspection, the inspector’s tab will be owed upon closing. 
  • Appraisal Fees. Your bank will ask for an appraisal as part of your mortgage application, given that you are financing the transaction. 
  • Prepaid Interest. Your loan will accumulate prepaid interest starting at the closing date and ending when you pay the first mortgage cost. 
  • Homeowner’s Insurance. Lenders typically ask you to take out a homeowners insurance policy, and the initial premium is due at closing. 
  • Title Search Insurance. Title insurance defends against any claims against the home’s title later on. Lender’s title insurance is generally required. 

Talk to a Realtor for Guidance

The Jana Caudill Team understands that buying or selling a home is a big deal, and you may feel confused about all of the costs that are involved. We can help you determine which closing costs you owe at a consultation. Contact us today. 

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