Closing Costs - A Basic Breakdown

By
Real Estate Agent with RE/MAX Elite

 Brentwood TN Real Estate

Basic Closing Costs
 The bundle of fees associated with the buying or selling of a home are called closing costs. Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiable or dictated by local custom. One example is that in Brentwood TN  (Williamson county) sellers most often pay for Title insurance, however move over to Rutherford County and the custom is for buyers to pay Title insurance. Your agent should be aware and up to date for the area you are purchasing in.

Buyer closing costs
 When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate of their closing costs. The fees vary according to several factors, including the type of loan they applied for and the terms of the purchase agreement. Likewise, some of the closing costs, especially those associated with the loan application, are actually paid in advance. Some typical buyer closing costs include:

The down payment
Loan fees (points, application fee, and credit report)
Prepaid interest
Inspection fees
Appraisal
Mortgage insurance (typically 1 year's premium plus an escrow of 2 months)
Hazard insurance (typically 1 year's premium plus an escrow of 2 months)
Title insurance 
Documentary stamps on the note

Seller closing costs
 If the seller has not yet paid for the house in full, the seller's most important closing cost is satisfying the remaining balance of their loan. Before the date of closing, the escrow officer will contact the seller's lender to verify the amount needed to close out the loan. Then, along with any other fees, the original loan will be paid for at the closing before the seller receives any proceeds from the sale. Other seller closing costs can include:

Broker's commission
Transfer taxes
Recording fees 
Documentary Stamps on the Deed
Title insurance (in many areas but not all)
Property taxes (prorated)

Negotiating Closing Costs
In addition to the sales price, buyers and sellers frequently include closing costs in their negotiations. This can be for both major and minor fees. For example, if a buyer is particularly nervous about the condition of the plumbing, the seller may agree to pay for the house inspection.
Likewise, a buyer may want to save on up-front expenditures, and so agree to pay the seller's full asking price in return for the seller paying all the allowable closing costs. There's no right or wrong way to negotiate closing costs; just be sure all the terms are written down on the purchase agreement.

Proration
At closing, certain costs are often prorated (or distributed) between buyer and seller. The most common is for property taxes. This is because property taxes are typically paid at the end of the year for which they were assessed. Meaning, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won't come due until the following year! To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for half the taxes at closing.

I hope this gives you the basic outline and idea about closing costs, feel free to visit my website or call for more information in the area you are purchasing.

Vanessa Stalets

Brentwood TN Real Estate

RE/MAX Elite

615-661-4400

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Vanessa Stalets

REALTOR, Brentwood TN Homes, Real Estate
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