For those who have never been experienced what it’s like to go through a real estate closing, there are often many questions regarding closing costs. As one might expect, closing costs are fees associated with everything it takes to finalize a mortgage. They can range dramatically depending upon the price of the actual home, and since some people don’t see them coming, closing costs are often a rather rude awakening.
Rather than staying in the dark, it’s important for both buyers and sellers to know ahead of time what they’re likely to pay in closing costs. The more educated you are on the process, the more smoothly it is likely to go.
Costs for buyers
Those who are in the market for a new home should expect to pay off a variety of different fees when the process begins to finalize itself. Buyers are typically charged any fees that are necessary for obtaining a mortgage, as well as home inspection costs, title insurance/settlement fees, the costs for property taxes and transfer taxes.
In addition, buyers need to expect to pay for homeowners insurance. The end result can add up to be around 10 percent of the final costs associated with the property, which is just one reason why buyers should pay close attention to the importance of budgeting for their closing.
Costs for sellers
While many people think buyers pay the vast majority of closing costs, this is typically not the case. While buyers usually have a wider array of costs to pay, sellers usually pay around the same amount of money in the end — sometimes even more.
For one, they need to pay off the costs of their loan which can sometimes include prepayment penalty fees. It’s also typical to pay commissions to an agent or broker — whomever was involved in the sale of the home. Add to this transfer taxes, fees for notary, attorney and title insurance, and it becomes quite clear that sellers are not exactly in a better place than buyers when it comes to final closing costs.
Negotiating closing costs
As one might expect, the variability of closing costs typically means that some degree of negotiation is at least a possibility. Given the fact that these costs can end up in the tens of thousands of dollars, it’s certainly worth exploring ways in which they could potentially be lowered.
For buyers, even saving 1 or 2 percent on closing costs can add up to be thousands of dollars. You can negotiate to save on costs instead of on the final price of the home, which will bring far more money to you, faster. Over the course of the life of a loan, saving a bit on the home’s price will only amount to a few dollars each month. Saving close to $5,000 up-front on closing costs, though, can turn into a much more noticeable payoff.
Sellers can negotiate as well. Every aspect of the closing process has a bit of leeway, which is just one reason why sellers should not be content with the initial costs of closing. By negotiating each step, you can expect to save almost as much as you would if you were the buyer. Negotiation can sometimes be uncomfortable, but it’s more than worth the time and effort – especially if it could save you thousands of dollars in the end.
As closing costs can end up being exceptionally high on expensive properties, both buyers and sellers should begin saving as early on as possible. Getting hit with these costs at the end of a closing can be devastating if you don’t know what you’re up against, and the more you know about how much you’ll end up having to spend, the less hassle you’ll deal with.
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