First off you may be asking… What are Closing Costs?? Many people think that closing costs consist only of their down payment. Closing Costs are other costs associated with the purchase of a home that need to be paid before escrow can close. These costs are in addition to the down payment. Closing Costs consists of many different things:
Escrow Fees- One fee that is called an escrow fee. Escrow is a conduit between the buyer, seller, agents and lenders. The primary task of the Escrow Company is the holding of the money and the coordination & distribution of funds. This fee is paid to the Escrow Company and its consists of processing the file, coordinating issues with title, and the drawing of loan documents.
Settlement Fee- Settlement fees are comprised of the Escrow fee, but it includes doc prep fee, courier fee, signing fee, e-mail fee and loan tie’in fees.
Title Fees- Title Insurance policy protects the Real Estate Owner or Lender against any loss or damage that they could experience due to liens, encumbrances, or defects to the said property. There are two types of Title Fees. 1. Owner’s Title Policy 2. Lenders Title Policy.
1. Owners Title Policy- Protects your ownership/title of the home the buyer acquires. Owners Title policy insures the ownership of the property to the buyer.
2. Lender’s Policy-ensures the lender on the property if there is a lender involved. Lender’s Title basically ensures that they are the true owner. An Example of how title could help would be if there is a legitimate claim for the property Title would cover the fees associated with it. Any type of Claim of Ownership to the property is basically what the Title Company will cover.
County Transfer Tax- which in Contra Costa County currently is $1.10 per $1,000. However, typically every County has one or more cities that the traditional amount of Transfer Tax is higher, like the City of Richmond currently is $7.00 per $1,000. For example: If you are selling a home for 500,000 your Transfer Tax would be $550.00 which is typically paid by the seller. All Counties Transfer Tax differs and it’s important to point out again that there could be certain city’s within a County whose Transfer Tax differs.
Property Taxes- Typically the new owner will start to pay the Property Taxes from the day that escrow closes and going forward.
Lender’s Fees– Fee’s the Lender of which the loan is being purchased and the loan is being transfer from have fees associated with this.
Payoffs and Reports Commission: Fee’s typically paid by the Seller for both the Selling Agent (that is the agent who brings in the buyer for the sale of the home, and the Listing Agent, the agent that Lists the home. Typically, and I say typically because depending on the climate of the market you need to remember that ANYTHING is Negotiable. Buyer and seller can agree on whatever terms they want (as long as they are not fraudulent or illegal).
Buyer will pay for BOTH Escrow and Title Fee’s (Owner’s Policy)
Seller will pay for the County Transfer Tax. The fee’s and who typically pays for what IS NOT THE case if the market is a favoring either the buyer or the seller. In a Seller’s market, the seller has the control and can request the buyer to pay any and all fees associated w/ the Closing Costs. The reverse is true as well. However, you need to remember that your Real Estate Professional will advise you on the climate of the market, status of how many offers are in hand, and any other material facts that will help both the buyer and seller know how to proceed with offers and counter offers.
Disclaimer – I am not an attorney or tax expert. Any comments I make in regards to legal/tax issues should not be relied upon. Please seek expert counsel in these areas for specifics to your situation and seller on how to proceed with the offer and counter offers.