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What Are Closing Costs and Who Pays for Them?
The various fees associated with buying or selling a home are called closing costs. Buyers and sellers both pay closing costs but who pays what costs can vary.
Buyers typically pay the following closing costs: title insurance; the fees associated with taking out a mortgage; inspection fees; a homeowner's insurance premium; (must be prepaid for one year at closing); escrow or settlement preparation fees; proration of mortgage interest and property taxes; a tax service fee; flood certification; transfer taxes and HOA fees, if there are any (although the seller may pay these or they may be shared 50-50 between buyer and seller); attorney's fees; a home warranty premium; miscellaneous documentation preparation fees and recording fees, to name a few.
Sellers' closing costs typically include: loan payoff fees and prepayment penalties on existing mortgages and other liens against the property; the Professional Fees/Real Estate commission; title insurance (depending on the location); termite inspection and termite repairs (this is negotiable in some areas); all or part of transfer taxes and escrow fees, if there are any; and other fees set by local custom or negotiated during the transaction. other repair work agreed to in the purchase contract; a home warranty premium; title insurance; transfer taxes, if there are any; proration of property taxes; attorneys fees; any credits the seller has agreed to give to the buyers at closing; and miscellaneous documentation preparation and recording fees. We provide an accounting of the closing costs you are likely to pay. (NET SHEET)
First Time Tip: Don't wait until your home sale is closing to find out how much your closing costs will run. If you're selling, the agent who prepares a comparative market analysis for you can calculate an estimate of your closing costs. (NET SHEET) To find out what charges will be levied by your mortgage lender, call the lender directly. Buyers should ask their mortgage broker or real estate agent to give them a list of the approximate closing costs they can expect to pay. (GOOD FAITH ESTIMATE)
The Closing: In a hot seller's market, your offer may not be competitive if you ask the sellers for a credit for your nonrecurring closing costs. In this case, you may want to increase the offer price to compensate the sellers for the amount of the closing cost credit.
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