Closing Costs Explained

In every real estate transaction, both buyers and sellers are responsible for certain costs. These costs are simply the various fees (e.g. taxes, commissions) paid in the process of finalizing the closing on a home. Below is a list of costs, along with explanations for each.

LIST OF COSTS:

Appraisal Fee: Fee paid to an independent appraiser.

Credit Report Fee: One-time fee to cover the cost of the credit report.

Document Preparation Fee: There may be a separate fee covering the preparation of the final legal papers.

Homeowner’s Fee: Upfront deposit or dues, fees to transfer records from seller to buyer (Transfer Fee).

Loan Discount: One-time fee to adjust the yield on the loan (often called POINTS).

Loan Origination Fee: One-time fee charged by the lender for their administrative costs.

Miscellaneous Title Charges: Title company fees for title search, title examination, document preparation, recording fees, notary fees, and closing or settlement.

PMI Premium: Depending on your down payment, there may be an upfront fee for mortgage insurance. Lenders also may require monies to be held by them in a reserve account.

Prepaid Interest: Per diem charge that varies depending on the day of the month the loan closes.

Taxes: Depending on the month the property closes; the buyer may reimburse the seller for property taxes.

Hazard Insurance: Insurance premium paid upfront; lender may require a certain amount of taxes and insurance in a reserve account. This account is held by the lender.

There are some costs that may be incurred before the closing date. For example, the buyers will pay for a credit check for the lender to determine their loan amount qualification. Additionally, an appraisal of the property must be done to determine its fair value. This appraisal fee may be paid by either buyers or the sellers as agreed upon in the sales contract. (If buying new construction, there may be an inspection fee.) There are also fees related to a title search on the property, and some buyers might decide to pay “points” to a lender at closing in exchange for a reduced interest rate.

Three days prior to the closing date, the lender sends a closing disclosure. This document provides the final details about the loan and the closing costs. At the closing, real estate professionals will help to navigate the final steps and explain all the closing costs that must be paid. The actual closing costs relevant to a transaction may vary depending on the mortgage loan type and contract agreement; however, they often include most, if not all, of the items discussed below.

Sellers Typically Pay:

– Owner’s title insurance premiums, the real estate commission, and 1/2 the escrow fee.
– All loans along with any interest, fees, or penalties.
– Loan fees required by the buyers’ lender according to the contract.
– Termite repairs or treatment, a home warranty, 1/2 the recording service fees according to the contract.
– Any judgments or tax liens.
– Tax proration for unpaid and delinquent taxes.
– All homeowner’s association unpaid dues and fees per the HOA addendum (if applicable).
– Any outstanding bonds or assessments according to the contract.

Buyers Generally Pay:

– Lender’s title policy premiums and 1/2 the escrow fee.
– Costs for document preparation, notary fees, and 1/2 the recording service fees.
– Two months of the homeowner’s association dues upfront if applicable.
– HOA transfer fee (might be split with the sellers – if applicable)
– New loan charges except as required by the lender for the sellers to pay.
– Interest on new loan from date of funding to 30 days prior to the first payment date.
– Home warranty, hazard insurance premium for the first year, all pre-paid interest, and a termite inspection according to the contract.

How to Choose a Company to Sell Your Home

Selling your home can be quite stressful and a complicated process so most sellers would rather choose to list their property with a real estate agent. For first-time sellers, this is your guide on how to choose a company to sell your house.

Begin with your own market research:

1. Scout the local housing market.

Drive around your neighborhood and check out repeat agent names on real estate signs. It would be an added bonus if there is a “sold” sign to these.

2. Go to open house events.

Look out for nearby open house events and see for yourself how real estate agents engage with potential buyers. Take time to talk to the agents. You might be able to get a glimpse of their personality and their character.

Make a comparison of different real estate agents in terms of ratings, references, and reviews:

3. Research online.

You’ll find a lot of information online. Perform a quick research on real estate agents you have identified. Check out reviews. Read previous customers’ comments and feedback.

4. If you can get a referral, the better.

Ask friends and family for personal referrals. Ask them of their experiences with particular real estate agents.

Interview different real estate agents:

5. Meet with at least three or four agents.

Remember to not settle on the first real estate agent you meet. You would need to have more than one possible agents on your list. This way you can compare rates, customer satisfaction ratings, and availability. It’s always good to work with professionals who have ample experience in real estate.

6. Make sure to prepare some questions prior to talking with the real estate agent.

Ask probing questions like:

- Have you been in real estate for long?
- How many active clients do you handle at a time?
- Do you have a team?
- What is your company’s expertise?
- How will you market my home? How do you find the right buyers who will take good care of your property.
- What do you propose as selling point for my property?

Early on, you should set clear expectations when looking for a real estate agent:

7. Make sure you are clear with your communication preferences.

One of the most common issues from clients is about the lack of open communication. Talk about how you want to be on the loop on the progress of looking for buyers. Discuss how often you’d expect to give feedback. You have to establish early on if you’ll maintain correspondence via email or phone calls.

8. Make sure your motivation to sell is clear.

It is important to have a specific requirements. Do you have a strict timeline? Do you have a requirement on a specific bottom dollar? You have to communicate with the agents all the particulars.

9. Talk about, analyze, and review selling strategies.

You’ll also have to ensure that you and your real estate agent are on the same page about how to go about with the selling.

10. Talk about and agree on all the important details.

Expectations should be clearly understood by both parties. Make sure to put in writing all of the specifics.

Your Full-Service Real Estate Company

AXIS Property Advisors is proud to be a full-service brokerage ready to help you rent, buy, or sell your next residential property. We also specialize in property management and assisting our clients in making solid real estate investments.

With over a decade of experience, we have built an incredibly trustworthy team that is devoted to high quality service. We’re committed to exceeding your expectations. We look forward to assisting you now and in the future.

Give us a call at (602) 614-5590, or send us an email to mgmt@AxisPropertyAdvisors.com