Hello and welcome back to my channel. I am Nagaraj Annaiah, your trusted tech realtor from the Bay Area. Most asked question during real estate transaction is what are the closing costs? Let’s understand what is closing. Also known as “settlement,” or “escrow,” closing on a home sale is the legal transfer of a property from one owner to another. Completing all of the steps necessary for the final contracts to be signed traditionally takes about a month, but in some cases, closing can take place anywhere from 15 to 60 days.
Closing costs are what the buyer and seller will pay as part of the escrow transaction. Some fees are negotiable between the seller and buyer as to “Who Pays What”.
Sample Closing Costs
The seller will have to pay commission fees to the real estate agents representing both the buyer and seller.
- PROPERTY TAXES
The seller is responsible for the payment of property taxes until the last day of ownership.
- HOMEOWNER'S INSURANCE
The buyer is responsible for purchasing a homeowner's policy prior to the close of escrow.
- ASSESSMENT AND LIENS
Any assessments or liens on the property need to be paid and/or resolved before the close of escrow. Examples include tax liens or judgments, etc. This is the seller's responsibility.
- TITLE INSURANCE
The financial responsibility for title insurance varies from county to county. In some areas the buyer is responsible and some areas the seller is responsible. Also, the buyer and seller may agree to a 50/50 split. Check with your real estate professional.
- ESCROW SERVICES
Like title insurance, the financial responsibility for escrow services varies from area to area. Check with your real estate professional.
- PROPERTY INSPECTION FEES
- TERMITE INSPECTION
- TERMITE REMOVAL COSTS
- DOCUMENT PREPARATION FEES
- DEED RECORDING CHARGES
- LOAN ASSUMPTION FEES
- HOME WARRANTY
- UTILITY ADJUSTMENTS
Let’s review the closing disclosure now to understand better
Loan amount is 1.195 Million, Interest rate is 4%, Monthly Principal and interest is $5,705.12
Total Closing cost is 17,247.55 which is huge amount for me, let’s see the breakdown.
Total Loan costs is $9034 and origination charges is 0.125% which is 1,493.75, processing costs is 1,675 which is high for me some lenders charges around $1000
Appraisal and credit report is $734.15
Other charges is including lender’s title insurance is $5,076.50
Taxes and other cost fees is 2,499 and city stamp tax deed is $2376 which is split 50-50% based on offer.
County tax stamp deed is paid by seller which is $1,584
Prepaids including homeowners and prepaid interest is 4397.15
Owners title insurance is $1,317 and next is real estate commission.
Total closing costs buyer paid is $17,247.55 and seller paid is $91,282.50
One more thing if you check initial disclosure closing cost was just $104,762 as it was just estimate and may be loan officer added all the costs to buyers . Don’t get panicked looking at the initial disclosure.
Here are some ways to save money on closing costs when buying a house:
- Negotiate with the Seller
If you're looking for a house that's within your budget but has higher-than-average closing costs, you can negotiate with the seller to reduce those costs or even get them removed altogether, if you make an offer that doesn't include them. The seller may accept your offer if they feel like they'll still make enough money on the sale.
- Get an Interest Rate Reduction
If your credit score is below 700, ask if there are any interest rate reductions available at your bank or credit union. This will reduce how much interest you pay over time and help lower your monthly payments too!
- Shop Around for Mortgages
Don't just apply for one mortgage offer right away—shop around! You might be able to find a better deal somewhere else! Check out several banks in person before deciding which one will be best for you financially speaking.
- Find an agent who will work with you to lower your costs
One way to save money on closing costs is by finding an agent who will work with the seller's agent to negotiate lower fees. Your first step should be to find an experienced agent like me who knows how to work with other agents and has experience negotiating with them.
Closing costs are a lot like taxes: you know it's going to cost you, but you're not sure how much. I hope these guidelines will serve you well. And if you are a first-time buyer, watch this video. I give you five tips to make the most of your property purchase. If you've watched this video till the end, please do like, share, and leave your comments below. It will encourage me to create many more helpful videos that will guide you in your home buying and home selling experience. Until next week, keep your frown upside down.