These days, there are more bidding wars for each home listed for sale. Some homebuyers offer to pay more of the closing costs. It’s important buyers and sellers budget enough for closing costs. The purchase agreement reflects the terms, conditions, and responsibilities of who is in charge of each expense.
Closing Costs Definition
The buyer and seller acquire several different services to complete the sale transaction. The Closing Costs are those expenses, different from the property’s price, to “Close Escrow”. Escrow is the independent depository that keeps all funds, instructions, and documents to complete the sale of the home.
Homebuyer’s Share
Usually, in Southern California, homebuyers pay the following expenses:
- Loan related costs are loan origination fees, discount points, credit report charges, appraisal fees, lender’s title insurance, private mortgage insurance in case the dowpayment is low, among others
- Home related expenses considers the inspections services, property taxes, and homeowners association fees
- Transaction related expenses are the escrow services
- Recording related expenses consider all deed recording fees
Home Seller’s Share
Usually, in Southern California, home sellers pay the following expenses :
- Sales related expenses considers the real estate agent’s commission and the disclosure reports
- Home related expenses considers the buyer’s title insurance, home warranty insurance, any repairs the seller agreed, the property taxes and homeowners association fees
- Transaction related expenses are the escrow services and the transfers fees.
- Seller’s concessions are those expenses that the Seller agreed to pay.
Final Thoughts on Closing Costs
In the United States of America, three days before closing, homebuyers receive a Closing Disclosure. This is the final breakdown of all the expenses known by the Buyer’s lender.
Sellers and Buyers pay only for the portion of the year they own the home. Escrow prorates the Property Taxes and Homeowner’s Association Fees accordingly.
The estimated budget you should reserve for the Closing Costs is between 4 to 7% of the agreed sales price for each side.
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