What are closing costs?
What are closing costs and who has to pay them? There are a lot of different definitions of these costs depending on who you ask, and they can be thousands of additional dollars on top of your downpayment.
Everyone is going to have their hand out when you buy a home: the lender, insurance companies, the government and the escrow company. Subsequently everyone will have to get paid, and that’s where closing costs come in.
We gave you the news now here is how to estimate how much it’s going to cost. Closing costs can run you about 3% to 4% of the purchase price.
Now you’re thinking, does that mean I have to pay for all them? And what about the seller? Why don’t they pay for something?
This is tricky because each state and each county with-in the states can do things differently. So we’re going to talk about the East Bay Area in Northern California. Basically, the buyer is responsible for all the big stuff. Like title insurance and escrow fees. These alone can be about 50% of all closing costs. Additionally, the buyer is also going to pay for their own taxes (find out more about property taxes HERE), insurance and lender costs. Add those all up, and we’re getting close to the whole enchilada.
Before for freak out, know that the seller pays the brokerage costs which can run to 6% of the purchase price. So it’s not like they’re not getting out unscathed. Here’s a good question though, can you as the buyer ask the seller to pay for your closing costs? Yes! A good trick is to essentially finance them. So if you were going to offer $500,000 and no closing costs, you could give the seller $505,000 and ask for a $5000 credit. That’s easier to do in a buyer’s market but its a good idea if you’re short on cash.
If you’re thinking about selling your home and want a free private consultation, just sent us a message.