Buyers

Q: What do Buyers typically pay for closing costs?

• Fees charged for obtaining a mortgage

• Title insurance both lender and owner.

• Escrow fees

• Pre-Paid Property taxes and Mortgage Interest

• Homeowner’s insurance 

• Appraisal fee

• Transaction Coordinator fee

 

Q: What are the typical closing costs?

Typical closing costs range from 2% to 3% of the home’s price.

Q: Can the credit be put towards the down payment? 

No, it cannot.  The down payment needs to come from the buyer.

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Sellers

Q: What do Sellers typically pay for closing costs?

• Loan Payoff

• Real estate commissions to brokerages

• Transfer taxes

• Notary fees

• Escrow fees

• Termite Inspection

• HOA Documents and Transfer fees

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Q: Why does the buyer need a closing cost credit? I never had one when I bought.

The closing cost credit simply frees up money for the buyer. The reason a seller never had one may be because either the credits were not available at that time or the purchase price at that time was much lower.

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Both Buyers and Sellers

Q: Who is responsible for paying closing costs and for which fees?

Both buyers and sellers can expect to pay closing costs.

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Q: Does the appraisal need to come in at the offer price or at the net sale price?

The appraisal does need to come in at the Offer Price.  This is usually not an issue.

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Q: If the buyers request a credit after a home inspection, what are the benefits of giving the credit towards closing costs vs price reduction?

This is another case where sellers just need to pay attention to the net number (see chart above). Whether the buyer requests a decrease to the offer price or requests a closing cost credit really does not matter to the seller. It’s the same either way.

With respect to the buyer, the benefit of a credit instead of a reduction in the sales price is that it will allow a buyer to keep cash on hand to do repairs, etc.  If a buyer and seller negotiate a price reduction following the home inspection, it won’t actually give the buyer money to do the repairs.  By doing a credit, the buyer essentially “puts cash in their pocket” by virtue of the fact that they are bringing less money to the closing.

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