Who Pays What? A Guide to Closing Costs

Welcome to Hotline Realty's comprehensive guide to closing costs in the real estate industry. In this detailed article, we will explore the various expenses associated with the closing process and provide insights into who typically pays for what.

Understanding Closing Costs

When buying or selling a property, it is crucial to be aware of the closing costs involved. These costs are additional expenses incurred on top of the purchase price and can vary depending on factors such as location, property type, and local regulations.

1. Property Appraisal: One of the most common closing costs is the property appraisal fee. The appraisal determines the market value of the property and provides assurance to the lender that their investment is secure. This fee is typically paid by the buyer.

2. Home Inspection: Prior to finalizing the transaction, it is important to have a professional home inspection to assess the property's condition. The home inspection fee is usually the responsibility of the buyer.

3. Lender Fees: The lender may charge various fees for processing the loan, such as loan origination fees, application fees, or underwriting fees. These fees are typically paid by the buyer, but they can be negotiable in some cases.

4. Attorney Fees: Hiring an attorney to review the closing documents and ensure all legal requirements are met is common practice. The attorney fees can be divided between the buyer and seller, depending on individual agreements.

5. Title Search and Insurance: A title search is conducted to ensure that the property's title is clear of any liens or encumbrances. The cost of the title search and insurance is often split between the buyer and seller.

Who Pays for What?

Now that we have a general understanding of the various closing costs, let's delve into the specifics of who usually pays for each expense:

Buyer's Responsibilities

The buyer typically shoulders the following closing costs:

• Loan-related Fees: As mentioned earlier, the buyer is responsible for fees associated with the loan, including origination fees, application fees, and underwriting fees.
• Appraisal Fee: The buyer pays for the property appraisal to determine its market value.
• Home Inspection: Hiring a professional home inspector is the buyer's responsibility to ensure the property is in satisfactory condition.
• Property Survey: The buyer may be required to cover the cost of a property survey to establish boundaries and property lines.
• Private Mortgage Insurance (PMI): If the buyer's down payment is less than 20% of the purchase price, PMI may be necessary, and the buyer bears the cost.

Seller's Responsibilities

The following closing costs are typically covered by the seller:

• Brokerage Commission: The seller is responsible for paying the agreed-upon commission to the listing agent or real estate broker.
• Title Transfer: The seller usually covers the cost associated with transferring the property title to the buyer.
• Title Insurance: The seller typically purchases title insurance for the buyer to protect against any title-related issues.
• Documentary Stamps: In some states, the seller is responsible for paying documentary stamp taxes on the property transfer.

Conclusion

Understanding the various closing costs is essential for both buyers and sellers in the real estate industry. By knowing who typically pays for what, you can properly plan and budget for these expenses. Hotline Realty hopes this comprehensive guide has provided you with valuable insights into the closing process and the associated costs.

For any further questions or assistance with your real estate journey, feel free to reach out to Hotline Realty, your trusted partner in the business and consumer services - real estate category.