Mysterious Real Estate Closing Costs

Buyers and sellers have told me they really do not fully understand why there are so many fees associated with the closing on their home. To make matters worse, most title insurance closing agents quickly read each line of the buyer's and seller's settlement statement and offer little to no explanation as to why each line item appears.

Certain fees are automatically assigned to either the buyer or the seller while other costs are dictated by local custom. Many of the closing fees are actually totally negotiable at the time of contracting if your agent is persuasive enough in writing and presenting your contract - or if you are selling, your agent is a better negotiator than the buyer's agent.

Possible Negotiable Items include nearly all of the following:

Customary buyer closing costs include:
• The down payment (the difference between the purchase price and the loan amount)
• Loan discount points
• Loan application fee
• Loan processing fee
• Loan underwriting fee
• Loan recording fees
• Lender administrative fee
• Buyer's credit report
• Prepaid interest from the date of closing through the end of the month
• Home inspection fees
• Homeowner’s association transfer fee
• Appraisal fee
• Homeowner's hazard insurance
• Title insurance company closing fee
• Mortgagee's title insurance
• Documentary stamps fee
• Prepaid property taxes
• Flood insurance certification
• Broker administrative fee
• Warranty deed recording fee
• Title insurance company endorsement fees
• HOA document retrieval fee
• County tax report fee
• Aggregate Accounting Adjustment
• Survey or ILC fee
When a buyer applies for a loan, lenders are required to provide a good-faith estimate of the expected closing costs. The lender's fees vary according to several factors, including the type of loan requested.

Customary Seller's closing costs include:
• Outstanding balance on the loan(s)
• Listing and selling broker's commission
• Transfer taxes
• Release of deed of trust fee
• Title insurance premium
• Title insurance company closing fee
• Unpaid Property taxes
• Water escrow for unpaid water
• Over night courier fee
• Release tracking Fee
• Homeowner's associations Special assessments
• County special assessments

At the closing, certain costs are often prorated (or distributed) between buyer and seller. The most common item is property taxes. This is because property taxes are not paid until the year following the tax year. So, if a home is sold on August 31st, that year's tax bill is not assessed until the following year. Therefore taxes are typically prorated using the prior year's (or most recent) county assessment and mill levy figures to project the current years taxes for closing.

Needless to say, fully understanding and negotiating the various closing fees can be financially rewarding. The easiest way to be successful in this process is to use the services of very seasoned professionals.

I have been helping buyers and sellers with their housing needs for the past 30 years. I look forward to assisting you. Feel free to call or email me. - Bill Kosena, ABR, CRS, SRES -303-796-0957