Lorraine Ryall
When you are buying or selling a home, you think about how much your mortgage will be and your down payment, or what your net will be after you pay off your current mortgage, but you probably don’t think about all the fees you pay up front and the additional closing costs.
In last month’s article I showed the estimated closing costs for buying and selling a home priced at $300,000 and $500,000, and this month I wanted to explain what those closing costs are and who pays what.
If you didn’t see the charts showing these closing costs last month, you can visit my website www.Homes2SellAZ.com under the blog section, or contact me directly and I will be happy to send them to you.
SELLER
- Fees paid before closing and at the time of service
- Any repairs agreed to after the 10-day inspection period will need to be completed at least three days prior to closing.
- If you have a septic, the seller needs to have it pumped and inspected prior to close.
Fees Paid at Closing
- Owners Title Insurance Policy: This is one of the larger fees on the settlement statement and one that gets asked about the most. In some states the buyer pays this fee, but in Arizona it is required that the seller pay for the Owners Title Insurance. Title insurance protects a policyholder against challenges to rightful ownership of the property.
- Escrow Fee: The seller and buyer will both pay an escrow fee. This is paid to the title company for their escrow officer handling the transaction.
- Recording Fee: The seller and buyer will both pay a recording fee, which is a fee for the mortgage and deed to be entered into record.
- HOA Disclosure Fee: The seller must pay the disclosure fee. This fee can vary by HOA and not all HOA’s have a disclosure fee. If there are any HOA fines, late payments or past dues owed to the HOA, the seller will pay these at closing.
- HOA Transfer and other HOA Fees: Can be paid by seller or buyer: Each HOA will have their own HOA fees. The two most commonly used are the disclosure fee and the transfer fee. Other fees may include a capital fund, condo cert, doc fee and others. All fees other than the disclosure fee can be paid by either the seller or the buyer and are part of the contract negotiations.
- Property Taxes: These are prorated between the seller and the buyer based on the close of the escrow date.
- Home Warranty: This can be paid for by either the seller or the buyer and is part of the contract negotiations. Currently we are seeing most sellers agreeing to pay for the buyer’s home warranty.
BUYER
Fees usually paid at time of service
- Inspection Fee: As soon as you go under contract, you are now in the 10-day inspection period. This is when the buyer will do all their due diligence and inspections. You may want additional inspections, such as an HVAC inspection, roof inspection, pool inspection, etc., and these may be at an additional fee.
- Termite Inspection: It is recommended and some loan programs require the buyer to have a termite inspection. This can be done by the inspector, but most times it’s a separate termite company.
Buyers fees paid at closing
- Lenders Insurance Policy: The lender will require a borrower to purchase a Lenders Insurance Policy to protect the lender should any issue with title arise.
- Escrow Fee: The buyer and seller will both pay an escrow fee. This is paid to the title company for their escrow officer handling the transaction.
- Recording Fee: The buyer and seller will both pay a recording fee, which is a fee for the mortgage and deed to be entered into record.
- HOA Transfer and other HOA fees: Each HOA will have their own HOA fees. The two most commonly used by HOA’s is the disclosure fee and the transfer fee. Other fees may include a capital fund, condo cert, doc fee and others. All fees other than the disclosure fee can be paid by either the buyer or the seller and are part of the negotiations when the offer is presented.
- Property Taxes: These are prorated between the seller and the buyer based on the close of the escrow date.
- The following charges can vary significantly between lenders, the type of loan and down payment amount. It’s important for a buyer to get this information ahead of time so they can shop it around to ensure they are getting the best lender with the best fees based on each buyer’s situation.
- Flood Certification: This is the fee paid to the company issuing the flood certification, which the lender requires to find out if your property is in a flood zone.
- Endorsement: This is an add on to the title policy required by the lender.
- Credit Report: The fee for the lender to run your credit report.
- CPL Fee: This is a required fee by the lender. It is insurance that protects the lenders funds while they are in escrow.
- Doc Prep: The lender may charge this fee for the document preparation.
- Underwriting: This is a fee for the underwriter on your loan.
- Appraisal Fee: If you are purchasing with a loan, your lender will order an appraisal. The appraisal is usually ordered once the inspection is complete and you know you are moving forward with the purchase. You may have to pay this fee up front, or it will be added to the settlement statement and paid at closing.
If you are thinking of buying or selling a home and would like to know your net proceeds and estimated closing costs ahead of time, please let me know and I can send them to you.
Call me any time, and I will be happy to answer your real estate questions. Please contact me at Lorraine@Homes2SellAZ.com, or call (602) 571-6799. Visit my website at Homes2SellAZ.com.