Who Pays for Closing Costs? Buyer and Seller Breakdown

Who Pays for Closing Costs

Closing costs are essential to understand when buying or selling a home. Closing costs can be anywhere from 3-6% of the home value or price of the home. So, for example, a $300,000 home will roughly amount to over $10,000. At that price, it is worth it to learn and understand the fundamentals of closing costs.

Usually, the buyer is responsible for most of the closing costs. That being said, this can change depending on the contract or purchase agreement when buying a home in Southern Highlands (or anywhere else). In some cases, the seller may pay for some of the costs as well. Let’s take a look at what influences who pays what costs during a home purchase.

What Are Closing Costs?

Closing costs sound pretty close to what they are: the costs associated with closing a home purchase. There are many fees that can come with a home purchase. Things like mortgages, appraisals, insurances, bank processing, and much more can be included in closing costs.

All these payments are required for the full purchase of the home to happen, and they can add up quickly. It is important to keep track of all these costs and fees. It is also important to know who is expected to pay what.

Buyer’s Closing Costs

While closing costs vary and can change based on the purchase agreement, there are closing costs that almost every buyer is expected to pay. Lender fees such as origination fees, application fees, appraisal fees are most common for the buyer to pay. Escrow charges are also commonly paid for by the buyer.

This can include homeowners’ insurance and property tax. Lastly, buyers are usually expected to pay title and closing fees such as title exams and insurance, recording fees, and prorated property taxes and homeowners association dues.

Your fees may not include everything on this list. It is important to note that some fees may not have to be paid given your circumstance, while others not listed may arise.

Seller’s Closing Costs

Sellers commonly pay fewer closing costs than buyers during a home purchase. Despite this, oftentimes these closing costs may be larger in price. It is common for sellers to pay the buyer’s title insurance, which often isn’t much.

The big hitter may come in the form of buyer and seller agent commissions. In the purchase of a home, it is common that the seller pays the commission of both their own real estate agents as well as the commission for the buyer’s real estate agent. While these commissions are not technically considered closing costs, they are still substantial around the time of closing.

In some cases, buyer and seller agent commissions may come close to, and even exceed that of the closing costs for the buyer. Do note that commissions can be negotiated, or even avoided altogether if the seller decides to sell the home for sale by owner.

Negotiating Closing Costs

Another way to reduce closing costs is to negotiate with the buyer/seller you are working with. Depending on the different circumstances surrounding the purchase of the home, you may be able to negotiate with the other party to take more of the closing costs than normal.

Consider offering a price for a home that is more attractive. If an offer comes in that the seller thinks is too good to pass up, they may likely want to do whatever possible to make sure the home is sold for that amount. This gives you a bit of leverage in terms of passing some closing costs onto them.

There are also a few things you can do to help your chances. Being easy to work with and making as few demands as possible. Having too many contingencies and hurdles for the seller to jump through won’t help if you want them to cover some or all of the closing costs, so making their job easier is a good idea as long as you are not sacrificing anything major on your behalf.

If you can, try offering to close on the deal quickly. Many sellers want to get their house sold as fast as possible as it can be a strenuous and stressful process. Relieving them of this work by offering a quick close may be grounds to negotiate them taking on some of the closing costs.

Reducing Closing Costs

Unfortunately, there is no way to avoid closing costs. However, there may be some ways to get closing costs reduced. Make sure to compare the companies you are thinking of using for the titles and escrow.

See what each company rates for their service and take that into account along with what they are offering. Some of the time there are less expensive options out there to help you save. If you are the seller and have some time on your hands, listing and managing the property on your own may save you money that you can put towards closing costs as well.

When Are Closing Costs Due?

Closing costs are typically due when the sale is finalized, and both the buyer and seller have signed all the documents. Once the buyer has the money made available for payment, the closing costs are due. However, this is something you will want to confirm with your real estate agent as it can differ from sale to sale depending on the agreement between the buyer and seller.

Conclusion - Who Pays for Closing Costs?

In the end, closing costs can go both ways. It is important to know that the buyer is most likely expected to take most of the closing costs. That being said, there are ways outlined above that may help if you want to reduce those costs. Once you have determined you can purchase a home with closing costs involved, you may then want to start looking into ways to save on those extra fees that are associated with the process.

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*Disclaimer: This article is for informational purposes only. Consult your licensed real estate agent or professional service provider on what is best for you.

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