An Overview of Common Home Sale Closing Costs
July 10, 2016
July 10, 2016
In real estate sales, “closing costs” refers to the costs and fees involved in buying or selling a home. These costs are normally paid through an escrow company, and may be split between the buyer and seller or paid by one side alone. In some cases, closing costs are negotiable (meaning the parties can decide who will cover the expense). Other closing costs are always paid by a specific party—either by custom or by law.
Although the specific costs associated with a home sales can and do vary, here’s an overview of the more common closing costs seen in Washington, D.C. area real estate:
- Broker & Agent Commissions. Real estate agents who list a home, and those who represent the buyers, normally receive a percentage-based commission on the sale. The amount—customarily 5-6% of the sale price—is set in the listing contract, and the fee is usually split between the buyer’s agent and the listing broker.
- D.C. area home sales normally trigger payment of three different taxes: a transfer tax(equal to 1.1% of the sales price for sales under $400,000, and 1.45% of the sales price on higher amounts), a recordation tax(calculated using the same percentages as the transfer tax), and property taxes due and unpaid before the date of sale.
- Water Bill Escrows. Sellers normally have to escrow a few hundred dollarswith the settlement agent to ensure they don’t leave buyers with an unpaid water bill.(This gets returned to the sellers if their final water bill is paid before closing.)
- Recording Fees. The costs of recording the transfer deed and the deed of trust (a document evidencing the buyers’ loan) normally run around $200.
- Lender Fees.Lenders may charge buyers a variety of fees, which also vary by state, loan type, and loan amount. Before buying a home, it’s wise to interview various lenders and ask for a breakdown of the costs and fees that might apply to your new home loan.
- Settlement Fees.These fees (normally a few hundred dollars) are charged by the settlement agent (customarily a title/escrow company or a lawyer), in return for performing services related to the sale.
This isn’t an exhaustive list of D.C. area closing costs (and different fees may apply in other places). Additional costs associated with selling a home may include the cost of home inspections, insurance, powers of attorney and other legal documents, as well as advertising, staging, and repairs. While not all considered “closing costs,” sellers should keep them in mind as well when listing a home for sale.
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