When buying or selling a home, it is common for homeowners to find that there are several unexpected costs associated with the process. While no one wants to pay any extra money while already grappling with a large purchase, they are a standard part of the traditional home selling process, and they should always be considered before you sign on that final dotted line. Let’s explore these costs and what you can expect from them.
Everything You Need to Know About Closing Costs
Closing costs are considered a type of fee in real estate. These fees are paid directly to the lender as a way of balancing their decision to provide you with a loan for the home. These costs will generally be used to cover key expenses associated with the sale, like home appraisals and the work that goes into confirming a home’s title. These fees can vary from one transaction to the next for both buyers and sellers.
Know Your Percentages
In most cases, closing costs are directly correlated to the price of your home. Most closing costs are found to be between 3% and 6% of the home’s total price. The total number will change in relation to the price of the home, which means that it can either be very small or turn into a very large amount of money if the home has a high value. The amount in closing costs that you pay can be negotiated in some circumstances, but most homeowners should expect to pay within this range during the sale process.
Remember That They Don’t Include Your Down payment
A common misconception that homeowners have is that the down payment is actually deducted from the total home price prior to determining the cost of the closing costs, but this actually isn’t the case. The amount will still be based on the original dollar value, but there is some leeway in this for some homeowners. Negotiating can be a good option, particularly if you are putting down a substantial down payment.
Who is Responsible for Paying Closing Costs?
Closing costs can be expensive, which is why you might be looking for a good opportunity to manage them. In many cases, negotiations include asking the seller to pay for some of the closing costs. This can help to limit the amount of the closing costs that a buyer is responsible for, but it is not always ideal for the seller of the home.
The Takeaway
If you are going to buy or sell a home in a traditional capacity, closing costs are an expected part of the deal. They are the final step in the process and should be considered an expected fee. It is important for sellers to remember that these costs can sometimes fall to them, adding new fees to the process that can have a notable impact on the sale. Anyone looking to avoid these fees—and the others associated with traditional home sales—can consider an iBuyer instead.