Nearly every Buyer that I have encountered always pose the same question/concern when it comes to financing the purchase of a home… “Can I find a place where I don’t have to pay closing costs”? I can feel the distress in their voices, and I can understand why they would want to try to cut some costs during such a big purchase, such as buying a house. However, I like to educate Buyers on the meaning of closing costs and why they may have to add those costs to their down payment.
Closing Costs are the precise mix of fees and other charges which all depend on the location of the property, the type of loan you’re approved for, and the type of property you’re buying. Home buyers (or sellers, depending on tradition in your area and what your Realtor negotiates with the seller) must pay these closing costs at the close of escrow when the property is transferred. Please note that some closing costs are tax-deductible, and closing costs do not include any down payment amount you’ve agreed to pay, it is an additional cost!
Some examples of different closing costs you might see include:
- Appraisal fees
- Credit check charges
- Home inspection fees
- Loan origination fees
- Title search fees
- Deed-recording fees
- Attorney fees
- Homeowner association transfer fees
- Property transfer taxes
- Real estate agent commissions
- Fees for additional inspections focused on lead-based paint, pests or other specific concern
These closing costs are ultimately the buyer’s responsibility, but often buyers and sellers negotiate an agreement where the seller covers specific costs or may offer a set amount to offset all or part of the buyer’s closing costs. It depends on the market, who is more motivated, the buyer or the seller and the negotiation skills of your Realtor. In Figure 9 below, is an example of a Closing Cost Detail Sheet.