What Do Buyers and Sellers Pay in Closing Costs?

Rarely does a buyer or seller show up to the closing without knowing exactly what their costs of sale will be.

In fact, based on the mortgage loan amount of the purchase/sale price, it’s not hard to ballpark either side’s closing costs. Before you get too far along in the process, ask your real estate agent or mortgage professional for an estimate.

Once you have a real, live deal with a closing date, you should be able to know your costs pretty close to the penny.

If you’re new to real estate or haven’t bought or sold in a while, here’s what you need to know about closing costs.

Buyers have a higher number of costs
In a closing, both buyers and sellers have costs. Usually, the buyer is faced with more line-item expenses than the seller (although sellers pay more).

For starters, most buyers are getting loans to make the purchase, and many of the charges stem from the loan.

A buyer should receive a loan estimate form early on in the sale process. This document spells out all the approximate costs the buyer will face when making the purchase, so there aren’t any surprises at closing. Some buyers use the information on the loan estimate form to shop for different lenders, interest rates and costs.

Typically, buyers getting a loan will see some of the following costs:

• Appraisal fee
• Origination fee
• Prepaid interest
• Prepaid insurance
• Flood certification fee
• Tax servicing fee
• Credit report fee
• Bank processing fee
• Recording fee
• Notary fee
• Title insurance

Be sure to go through these fees line by line with your mortgage professional to understand exactly what they are and how they apply to your loan.

Aside from the expenses of getting a loan or buying a home, some expenses, such as property taxes or homeowners association dues, are pro-rated and paid at the time of closing. For example, if you’re buying a home and you close toward the end of the property tax period, you’ll likely need to pay the balance of taxes upfront.

The same holds true for prepaid loan interest. If you close toward the end of the month, the lender may ask for the first month’s payment up front.

Negotiate sharing some of the costs
Coming up with an extra one to two percent toward closing costs can be a bigger deal than a $5,000 reduction in the purchase price, so ask the seller to pick up some of the closing costs as a part of the negotiation.

Credit for $5,000 to go toward closing costs will be a much greater bang for the buyer’s buck. The price reduction won’t amount to much more than a few dollars per month over the length of the home loan. But saving $5,000 at the closing will be money right back in the buyer’s pocket.

Sellers pay the commission
For sellers, there are always fewer line items on an estimated closing statement. But the seller generally bears the biggest brunt of the fees: the real estate commission.

The commission is based on a percentage of the total sale price, so it tends to be the biggest fee. In addition to the real estate commission, sellers may have to pay the balance of their property taxes, if they haven’t done so already, as well as any prorated homeowners association dues.

Source: Zillow Porchlight, Brendon DeSimone
http://www.zillow.com/blog/who-pays-closing-costs-140343/

How to Dodge a Closing Day Curveball: 3 Real-Life Home Saves

With the MLB season set to begin, we’ve got baseball on the brain. Specifically, we’ve been thinking about how even the greatest sluggers sometimes strike out when faced with a nasty curveball, knuckleball, or slider. But hey, curveballs can strike—metaphorically speaking—in other parts of our life as well. Like buying a home!

A lot of twisty, unpredictable, and downright frustrating things can happen on closing day. But no matter what goes wrong, you may still be able to pull off a last-minute (home) save. So get out the scoreboard and heed the advice of these three buyers who were struck by surprises late in the ninth inning.

Time zone terror

Are you dealing with a buyer or seller in another time zone? It pays to plan accordingly. Michelle Faulkner, principal of Big Swing Communications, relayed a tale of time zone terror that happened to her 12 years ago. She and her then-husband planned to have a same-day sale and purchase, selling their condo in Watertown, MA, to a buyer from San Diego and buying a family-friendly place in the burbs of Reading, MA. The back-to-back closings were to take place on the Friday before the Fourth of July weekend.

“We didn’t realize until the closing he was using a West Coast bank for his mortgage. The closing went smoothly, except the funds from his bank hadn’t arrived. They were due ‘shortly’—our attorney told us not to worry, and we went on to the closing for our purchase,” Faulkner recalls. “We had a 17-month-old daughter and a packed moving truck waiting.”

The funds didn’t come through for four days. The seller’s attorney allowed them to move their stuff into their new place, but they couldn’t sleep there, so the family had to shack up with a friend. Later that day, “I felt a little nauseous,” she says. A familiar kind of nausea. “Yup, found out that night I was pregnant. Pregnant and temporarily homeless.”

Take-home lesson: When you’re doing back-to-back closings, make sure everyone is crystal clear on the timeline and time zones.

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Absconded appliances

It’s imperative that everything is accounted for in writing, or else you may find yourself like the buyers in this story.

Last year, Brett Vlasek, a Realtor® with VIP Real Estate Brokers in Delray Beach, FL, represented a seller who had a ruby red Samsung washer and dryer set that was admired by many potential buyers who visited the home. One day, a buyer came through and, after remarking on how wonderful the appliances looked, put in an offer.

All was well in this small townhouse, until the final walk-through on closing day.

“The ruby red washer and dryer were replaced with a run-of-the-mill, plain white set,” Vlasek recalls. The buyer wasn’t happy, and refused to close on the house without the Samsungs. Alas, the sellers had already moved out of state—with the scarlet set. They were also a bit perplexed.

“They insisted they’d told the buyer and her agent that they were going to keep the red appliances and replace them before closing,” Vlasek says. Neither the sellers nor the buyer would budge. With the danger of a deal falling through, the agents came together and gave the buyer a credit at closing “to purchase a brand-new washer and dryer in whatever color she pleased.” Yeah, including Dorothy-slipper red.

Take-home lesson: Whether you’re a buyer or seller, make sure you convey what does or doesn’t come with the property, in writing. As a general rule, if it’s attached to the home—for example, light fixtures or built-in bookshelves—it stays, but appliances are considered movable. That said, getting it down in writing will help you avoid any closing day delays.

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Liens from beyond the grave

After two years of his house sitting on the market in Gloucester, VA, Matt Sabo jumped when an offer came along. He, his wife, and their 11(!) kids would need to find a home to buy before their sale would close in four weeks.

They found a 1960s ranch estate that needed a few updates but seemed like a solid investment. Everything was looking good, and Sabo’s ginormous family wouldn’t be homeless. Right?

“The bombshell came two days before closing,” Sabo recalls. The title search found there were liens against the property. “We were told it shouldn’t take more than a few weeks to get it straight.” It turned out to be more like five months. Naturally, his first reaction fell someplace between alarm and outright hysteria, but his Realtor/closer took the mound and saved the game.

“Our Realtor managed to work out a deal where we could stay in the house, rent-free, while the bankruptcy issue got cleared up,” Sabo says. “Ultimately we ended up moving into the house on time and living in it for five months until we closed.”

For anyone in a similar situation, Sabo says not to panic. Get your agent on the phone and start thinking outside the (batter’s) box.

“We got creative in making a deal, and it turned out well,” he says. “It was a case of a potential disaster turning into a blessing.”

Take-home lesson: Make sure to do a title search on a property you want as soon as possible—ideally, weeks before you close. That way you’ll uncover any liens or other problems long before you’re in too deep.

Source: Realtor.com, Craig Donofrio
http://www.realtor.com/advice/buy/closing-day-curveballs/?iid=rdc_news_hp_carousel_theLatest

9 hidden costs that come with buying a home

Buying a home isn't just a 20% down payment and a monthly check for the mortgage.

There are a mountain of hidden costs — from closing fees to taxes — that can add up to more than $9,000 each year, real estate marketplace Zillow estimates — and that number will only jump if you live in a major US city.

Business Insider spoke to Zillow's chief economist, Svenja Gudell, about the three big unavoidable costs — homeowners' insurance, property taxes, and utilities — and other common costs that are often overlooked.

If you're considering buying a home, be mindful of these expenses when establishing your budget, Gudell says:

Source: Business Insider, Dylan Roach and Kathleen Elkins

http://www.businessinsider.com/hidden-costs-of-buying-a-home-2015-10