Understanding Closing Cost.

Closing costs are the fees and expenses associated with the purchase or sale of a property. These costs can vary depending on the location and specifics of the transaction. They are typically paid by both the buyer and seller.  Closing cost can add up to 2-5% of the purchase price of the home. Sometimes depending on the market, buyers can negotiate that the sellers pay a portion of their closing cost.

Here are some common closing costs in real estate:

Appraisal fees: This covers the cost of an independent appraisal to determine the value of the property. Most lenders require an appraisal as a condition of a loan closing.

Title search and insurance: The seller is responsible for providing clear title at closing which requires a title search and title insurance. However, these costs are based on the property location or the contractual agreement between both parties.

Home inspection: This cost covers the inspection of the property to identify any potential issues with the home’s structure or systems.

Loan origination fees: These fees are charged by the lender to process the mortgage loan. They can include application fees, underwriting fees, and other administrative costs.

Escrow fees: These fees cover the cost of a third-party company to manage the transfer of funds and documents between the buyer and seller.

Transfer taxes: These taxes are charged by local governments to transfer ownership of the property from the seller to the buyer.

Most common buyer’s side closing costs in real estate:

Down payment: This is the amount of money the buyer puts down towards the purchase price of the home. It could be as low as 3% depending on the type of loan and the financial situation of the buyer.

Home inspection: The cost of the inspection typically ranges from $300 to $600. In some luxury properties or multifamily the inspector could charge up to $800+.

Appraisal fees: The cost of an appraisal typically ranges from $400 to $700. However, in some cases it could cost up to $2000. It depends on the size and type of the property, the location of the property, and the amount of research the appraisal ends up doing. The cost will be less for a single-family appraisal than a multifamily one.

Title search and insurance: Title search is usually paid by the seller in Miami Dade. In some cases, buyer will need to pay for a title search to ensure there are no liens or claims against the property. On the other hand, title insurance  is typically pay by the  buyer. The cost ranges from $500 to $2,500, depend on the purchase price. Lender (mortgagee) title insurance policy will be needed when financing.

Loan origination fees: The buyer will need to pay for loan origination fees, which cover the lender’s costs of processing the loan. These fees typically range from 1% to 3% of the loan amount.

Prepaid expenses: The buyer may need to prepay certain expenses at closing, such as property taxes and homeowners’ insurance.

Attorney fees: Some states require the buyer to have an attorney present at closing. The cost of an attorney typically ranges from $500 to $1,500.

Escrow fees: The buyer may need to pay for escrow services, which hold funds in trust until the transaction is complete. The cost of escrow services typically ranges from $500 to $1,000.

Common seller’s side closing costs to be aware of:

Real estate commissions: The seller typically pays a commission to their real estate agent, which is usually a percentage of the sale price. The commission can be around 6% of the sale price.

Transfer taxes: The amount of transfer taxes can vary, but they are typically a percentage of the sale price. In Florida it is $0.70 on each $100.00 or portion thereof of the total consideration. But in Miami-Dade County the tax rate is $0.60 cents on each $100 or portion thereof. Miami-Dade County also has a surtax of $0.45 cents on each $100 or portion thereof however single-family dwellings are exempt from the surtax.

Attorney fees: In some states, the seller is required to have an attorney present at closing. The cost of an attorney typically ranges from $500 to $1,500.

Title search and insurance: The seller will usually need to pay for a title search to ensure title is clear and marketable. It range from $150-$350 in a residential transaction.  Sometimes as a seller concession seller will pay for title insurance.

Prorated property taxes and HOA fees: The seller may need to pay a prorated share of property taxes and homeowners association (HOA) fees for the time they owned the property during the year.

It’s important to note that the above costs are just a general guide. The actual costs will vary depending on the specifics of the transaction. It’s a good idea to work with a real estate agent or attorney who can help them understand the closing costs associated with their particular transaction.