Closing costs are an important part of a residential real estate transaction. It’s important for both buyers and sellers to understand that these costs may need to be covered at that time. This goes beyond long-term costs like future insurance payments or mortgage payments.
Exactly what these costs look like is going to differ from one case to the next. Below are some examples on both sides, for buyers and sellers.
Costs for buyers
Closing costs for buyers can start with lender fees, which is the cost of drawing up and processing the loan. Buyers may also have to pay for a home appraisal or a home inspection. Insurance payments may need to be paid at closing so that the home is insured as soon as the buyer takes ownership. There can also be different title costs, such as ensuring that the title is valid or purchasing title insurance.
Costs for sellers
Sellers may also need to cover some title costs, and they may take these on instead of the buyer in some situations. Sellers also need to consider things like property taxes or transfer taxes. If the home is in an HOA, then the HOA may have specific fees, depending on the agreement that the previous homeowner signed. Additionally, if the seller already has a mortgage, then their mortgage payoff may be owed when they sell the house.
Negotiation and legal options
In many cases, buyers and sellers negotiate over who has to cover closing costs, and one side may agree to take on all of those costs in order to facilitate a smooth transition. In other cases, the costs can be rolled into the new mortgage. All of this can be complex, and it’s important for each party to know what legal options they have with such an expensive asset on the line.