Have you ever wanted to know who pays closing costs on a real estate deal? Herein, we will discuss in detail the closing costs one can expect to pay on a deal and who is responsible to pay the closing costs.
Closing costs are something that most buyers do not prefer to talk about as they are already spending a lot of money on the house. Closing cost is an additional payment made in order to enable one to make a subsequently larger payment. However, it is to be noted that closing cost is evitable and one has to bear the expense at one point or later.
Now let us try to understand who pays the closing cost.
Who pays closing costs on a house?
As a matter of fact, certain costs are to be paid both by the buyers and sellers at the closing table. Closing costs, which especially consist of the ‘line-item expenses, are solely reserved for the buyers. Though sellers too have to bear some expenses at the closing table, that generally cannot be counted as closing costs. The real estate commission or the broker’s fee has to be paid by the seller at the time of closing. And the rest of the charges and expenses are the buyer’s responsibility. Unless the terms of the deal dictate otherwise, it is the responsibility of the buyers to pay the closing costs.
Who is responsible to pay the closing costs?
Usually, it is the responsibility of the buyer to pay the closing cost at the end of a real estate deal. Either party could pay the closing costs. But it is typically the buyer’s responsibility to pay the closing costs. Closing costs can be negotiated and in order to expedite a sale, the seller can offer to pay the closing cost. The reasons could be many, for either party to take responsibility to pay the closing costs on an impending deal. It is expected that the buyers pay the closing costs on a deal but it is not necessary that other arrangements with regard to this can’t be made.
Seller closing costs
As per the real estate norms, sellers don’t need to pay the closing costs. Closing costs are synonymous with terms related to line-item expenses like appraisal fees, title insurance etc. Sellers are only expected to pay the fees of the real estate broker. Realtor fees are not counted as part of closing costs but have to be paid at the time of deal closure.
There are some additional seller costs that are to be noted. You may be required to pay a one-time load repayment fee which would depend on your mortgage company. Hence you need to ensure that you read all the terms and conditions of the mortgage before closing. For instance, any home improvement tasks such as light fixture repairs, paint touch-ups are required to be accounted for. Moving expenses can be overlooked but it is important to consider the costs of hiring a moving company when it is time to leave your property.
Average closing costs for sellers
Though this is not a closing cost technically, it is the responsibility of the seller to compensate the real estate agent who is representing each side of the deal. A real estate agent charges approximately 6% of the sale price of the home as commission.
Buyer closing costs
A lot of closing costs arise from the loan the buyers are acquiring to buy the property.
Below provided list is the average closing cost for the buyer:
- Appraisal fee.
- Origination fee.
- Prepaid interest.
- Prepaid insurance.
- Title insurance.
- Tax servicing fee.
- Credit report fee.
- Bank processing fee.
- Recording fee.
- Notary fee
Average closing costs for buyers
The closing cost would amount to 2% to 5% of the purchase price. You need to be sure and must be aware of where the money is going before you pay the closing costs. Also, make sure that you go through each line item with a mortgage professional in order to have a clear understanding of the situation.
It is important to know about the intricacies of closing costs and when and where you are required to pay them. Also, it is very important to know who should pay the closing costs of a property.