When helping my clients buy and sell residential real estate, I am often asked the question about closing costs. First, my clients want to know what are closing costs and how much are they? Often followed by the question of who pays for closing costs
… the buyer or the seller?
Here’s an answer that you probably don’t want to hear … it depends! I know, I know, all too often we want a clear answer, black or white, yes or no, always or never. However, in real estate, where everything is negotiable, there is no always in any situation.
But, don’t lose hope just yet … I do have some guidelines with explanations for you to help navigate the sometimes choppy waters of a real estate transaction.
If you are the Seller in a traditional sale real estate transaction, there are certain fees that you MUST pay, where the buyer is unable to pay on your behalf.
CIC ReSale Package
If you live in a Common Interest Community, more commonly known as having an HOA, the seller is required to purchase the ReSale Package and Demand Statements. In the Greater Las Vegas Valley, average costs for the ReSale Package can vary anywhere
from approximately $100 to a whopping $1000 depending upon your community fees and/or if it’s in a Master Planned Community. As a note, there is also a Demand Statement needed from the HOA. This fee is usually around $250, depending upon the HOA policies,
and can be negotiated when an offer is presented.
While we are on the subject of Common Interest Communities, or HOAs, the seller is responsible for paying any outstanding CIC fines or penalties at Close of Escrow.
Real Property Transfer Tax
This is a fee that is paid to the state. The current rate for this is $5.10 per $1,000 of the sale price. For example, if the home sells for $400,000, the payment required would be $5.10 * 400 = $2,040. Obviously, the higher the sale price, the higher
the Real Property Transfer Tax fee and visa versa. In Nevada, there is proposed legislature to raise this fee to $5.25 per $1000, which, if passed, would mean more Closing Costs paid at the sale of a home. Regarding who pays for this fee, I don’t
want to say the buyer is unable to pay for it, so let’s just say that it has been a VERY LONG time since I’ve seen anyone other than the seller pay for it.
Pest Inspection for VA (Veterans Administration) borrowers
There are certain items that VA borrowers are forbidden to pay as part of their Veteran benefits. One such item is the mandatory Pest Inspection to satisfy their loan requirements. While it is an extra cost to the seller, the good news is that this
charge is minimal and is usually around $100. I like to think of this extra charge as a small “Thank You” for the Veteran’s service to our country.
Real Estate Commissions
When utilizing the services of a real estate professional, the seller is responsible for real estate commissions for both the Listing Agent and Buyer’s Agent. Within your listing agreement those fees are detailed out, and depending upon what you’ve
discussed with your agent, you will have a Listing Agent Commission and you will offer what’s called a Co-op to the Buyer’s agent. The co-op is the fee for finding a ready, willing and able buyer to purchase your home.
If you decide to For Sale By Owner, please understand that you will still need to negotiate a co-op for your buyer’s agent.
Outstanding Liens on the property
If during the title inspections, liens on the property are found, it is the seller’s responsibility to either pay the outstanding debt or dispute the charge if the lien is erroneous.
This one may go without mentioning, but as a Seller, you do have to pay off your existing loan (if you have one) from the proceeds of your sale.
Utilities are not exactly a closing cost, but I believe it is worth noting. The seller is responsible for ensuring all utilities are on through the buyer’s due diligence period and at the buyer’s final walk through near the end of the transaction.
If you are a Buyer in a real estate transaction, there are not too many fees that you MUST pay, where the seller is unable to pay on your behalf. Here are the possible fees that buyers may pay. Please ask your agent if it is feasible or a good
idea to ask for a seller’s contribution to your closing costs in your offer.
During your pre-qualification period, you and your lender would have discussed this percentage amount. Down payment requirements vary depending upon your loan type. And, based on your situation, you could be eligible for Down Payment Assistance
Programs. Be sure to discuss the pros and cons of these programs with your lender and choose the loan program that best fits your needs.
Home Inspection and/or Appraisal
The home inspection is done during the buyer’s due diligence period. Because it benefits the buyer to have any type of inspection done, most of the time the buyer pays for it.
Appraisals are a loan requirement, and typically the buyer would pay for this, because it is their lender requiring the appraisal inspection. Obviously if it is a cash purchase, it is the buyer’s choice whether to have an appraisal completed.
As a note, both of these charges are usually paid BEFORE close of escrow.
Before selecting a lender, I always recommend my buyers do their due diligence and compare lender rates and fees. Be sure to check for Origination Fees, Rate Buy Down Fees, Underwriting Fees, and/or Processing Fees incorporated into your estimate.
Ask questions and compare.
Typically lender fees are buyer paid, unless the seller is contributing toward the buyer’s closing costs, then these fees could be included.
Taxes, Insurance, and Interest
Loan requirements mandate that a portion of taxes and insurance be paid at time of closing by the buyer. An estimate is approximately 14 months of taxes, 4 months of insurance, and 15 days of Interest.
This is a minimal charge, and is usually around $150-$200.
Miscellaneous Closing Costs
Here’s the tricky part of ALL of this … depending upon market conditions, buyers or sellers can help the other in closing costs. Again, depending upon market conditions and your agent’s recommendation, ask whether it is a good idea to offer/counter
these terms, and/or the amount. Loan guidelines state that the seller cannot contribute more than 3% of sale price toward the buyer’s closing costs. So keep that in mind when you are in negotiations.
Just a few more items regarding Closing Costs… these next few can be negotiated. Talk with your agent about market conditions as to whether it is in your best interest to negotiate these items with your offer.
In our area of the country, Title and Escrow companies are the same. Whoever is chosen for Title, also handles Escrow, and visa versa. Depending upon the Title/Escrow company chosen, the price of the home, closing date, etc. It pains me to
say “typically” in any real estate transaction, but many times, Title/Escrow fees are split evenly between buyer and seller.
Property Taxes and Utility transfers
Property taxes and Utility fees are typically prorated and split evenly between the buyer and seller based on the close of escrow date. Some assessments are paid for in advance and others are paid for in retro. For example, if your assessment
is due quarterly, paid in advance, and you close escrow prior to that quarterly time period ending, you as the seller, will receive a credit for the amount you pre-paid. The buyer would be responsible for the prorated amount to the end of
the quarter and future payments.
There are varying degrees of coverage from a Home Warranty, but the purpose of it is to cover the buyer against unforeseen mishaps that may occur after the buyer moves in. Again, depending upon market conditions and your agent’s recommendation,
this item can be negotiated regarding who pays for it, if the buyer chooses to have one.
Phew! We made it out of that Fee Forest alive. Congratulations … you are now more educated than most buyers and sellers. As a disclaimer, I need to mention that there is no way to cover all the potential fees assessed or your particular fees.
Every buyer and seller will have different fees paid depending upon what is negotiated in your listing contract or purchase agreement, market conditions, lender chosen, title company chosen, sale price, and a slew of other factors.
If you are considering buying or selling a home and have any questions about your particular fees, please don’t hesitate to reach out. We are happy to assist to make sure you get the answers you need.
Contact us at: Hello@EliteHomeFinders.com
| (702) 222-3366.
Shauna R Gut
(702) 957-1556 direct
Elite Home Finders
1980 Festival Plaza Drive, Suite 400
Las Vegas, NV 89135