When home sellers set out to calculate how much money they’ll make from their sale, they often forget to factor in closing costs. It’s hard not to feel blindsided by these costs, especially because they come at the end of the sale, and it isn’t always clear what exactly you’re paying for. Show
Here’s what we’ll cover:
What does closing on a house mean?Closing is the phase in the home selling process when money and documents are transferred in order to transfer ownership of the property to the buyer. In a successful closing, both buyer and seller fulfill the agreements made in the contract. The seller will pay off all loans on the property to clear title, and the buyer and their lender will wire transfer money to cover the balance owed on the purchase. Closing is facilitated by a third party called an escrow company, which ensures that all money, documents, and other items needed to close the sale are properly exchanged. → Haven’t heard of Opendoor? We’re making it easier to buy, sell, or trade-in a home. What are closing costs?Closing costs are an assortment of fees—separate from agent commissions—that are paid by both buyers and sellers at the close of a real estate transaction. In total, the costs range from around 1% to 7% of the sale price, but sellers typically pay anywhere from 1% to 3%, according to Realtor.com. While buyers have more items to pay for at the closing of a house, it’s often up to the seller to cover the commission for both agents. Closing costs for sellers are deducted from the profit you make on the home, unless you have low equity, in which case, you may need to bring some cash to the table to cover the expenses. If you’re wondering why closing costs vary across such a wide range, it’s because there are different fees and legal requirements for each state and municipality. → A cash offer from Opendoor allows a faster, more certain sale. See what we can offer for your home. What is included in closing costs?You can typically expect the following costs when you close the sale: We summarized the types of fees below. Click on the cost type, and you’ll jump directly to the description.
Here are the types of closing fees in more detail: Title search
Title insurance
Home inspection
Appraisal
Survey
Credit report
Loan payoff costs
Mortgage payoff / prepayment penalty
Outstanding amounts owed on the property
Transfer taxes
Recording fees
Settlement or attorney fee
Any additional state requirements
Fees vary widely as different states and municipalities have different requirements. For instance, Bankrate reports that average total closing costs for a $200,000 loan in New York are $6,843, while average closing costs for a similar loan in Iowa are only $2,114. Who pays closing costs?Typically, both buyers and sellers pay closing costs, with buyers generally paying more than sellers. The buyer’s closing costs typically run 5 to 6 percent of the sale price, according to Realtor.com. The buyer’s closing costs typically include:
The main closing cost for the seller can include:
The buyer may ask you to pay some or all of their closing costs. If you agree to do so, this will be reflected in your net proceeds. Sellers are usually also responsible for paying both real estate agents’ commissions, which can cost another 5 to 6 percent of the sale price. Your closing costs, as a seller, will be deducted from proceeds you make on the home, unless you have low equity, in which case you may need to cover some expenses out of pocket. The amount of money you walk away with after these costs is referred to as your net proceeds. → Also buying a home? Learn more about trading-in to save money and move seamlessly into your next home. How to calculate closing costs?As we’ve seen, closing costs depend on a number of factors, including the property’s value and the requirements of your state and municipality. Your costs at closing can vary widely depending on all of the above items, especially your loan payoff costs, title fees, as well as the commission rates of the agents involved. You should also take your property’s value and the requirements of your state and municipality into account. To get an estimate of your net proceeds, use our home sale calculator. You can input items like moving costs, repairs, and agent fees to see how it all tallies up. → Try our home sale calculator or get your home value to price your home competitively. Should you pay the buyer’s closing costs?Sometimes, a seller may offer to pay part or all of a buyer’s closing costs. This is known as a seller concession ie an offer to sweeten the deal. Doing so may make your property more enticing in a competitive market. A buyer may also ask for a concession during the renegotiation process. For example, if an issue arises during the home inspection that you are unable or unwilling to pay for, the buyer may request a concession to make up for this. Discuss any possible concessions with your agent to make sure your net proceeds from the sale align with your goals. When you close with Opendoor, you don’t need to worry about sweetening the deal. You get a competitive, all-cash offer. We complete a home condition and repair assessment. And then you choose your close date. It’s that simple. Read more: How much are closing costs for the buyer? Final thoughtEveryone deserves to have a clear idea of the fees they’ll pay at the close of a home sale. Hopefully, this helps clarify closing costs and gives you the information you need to sell your home with confidence. This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.
How do you factor in closing costs?5 Factors That Influence Your Closing Costs. Appraisal cost. A home appraisal is a must-have for a home mortgage. ... . Title insurance. Title insurance protects you against issues that may come up connected to the title of the property you're buying. ... . Underwriting and processing fees. ... . Real estate broker fees. ... . Origination fee.. What are closing costs quizlet?A portion of the total cost of an item that must be paid at the time of purchase.
How are closing costs calculated in PA?Calculating the amount of your closing costs is to do a simple math equation where you take the sale price of the house and multiply it by the closing cost percentage. So, for example, if a home sold for $300,000 in Pennsylvania with 6% closing costs it would be $300,000 x 6% = $18,000.
Why are closing costs one time fees quizlet?Why are closing costs a one time fee? d. The closing costs cover titles, taxes, and realtor costs. After closing, the only monetary obligation is to the lending party.
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