Closing Costs Explained

The fees associated with the buying or selling of real property are called closing costs. Certain closing fees are automatically assigned to either the buyer or the seller; others are either negotiable or dictated by local or state law.

In addition, buyers and sellers frequently negotiate closing costs including both major and minor fees. There's no right or wrong way to negotiate closing costs. The most important this is to be sure that the final agreed upon terms are in writing on the purchase agreement.

Buyer Closing Costs:
When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate of their closing costs. The fees vary according to several factors, including the type of loan and the terms of the purchase agreement. Some of the closing costs are paid in advance. These are mainly based around the application fee at the inception of the process. Some typical buyer closing costs include:

• The down payment
• Loan fees (credit report, application fee, points)
• Prepaid interest
• Inspection fees
• Appraisal
• Documentary stamps on the Note
• Mortgage insurance
• Hazard insurance
• Title insurance

Seller Closing Costs:
The sellers most typical and important closing cost is any remaining balance due on their loan on the subject property. Before the date of closing, an escrow officer will contact the seller's lender to verify the amount required to satisfy the loan agreement. This initial loan balance along with an any other fees accredited to the seller at closing must be paid before the seller may realize any proceeds from the sale. Some typical seller closing costs include:

• Broker's commission
• Transfer taxes
• Documentary Stamps on the Deed
• Title insurance
• Property taxes (prorated)

Prorations:
At the closing, certain costs are often prorated. The most common proration is usually for property taxes. Property taxes are typically paid in arrears. An example would be a property that sold mid-year. Another example would be a property that had an in-place income stream, like a lease.

We hope this was an informative look into closing costs. Please contact us for the latest in Miami Florida Real Estate.