The home buying process is very intricate and when done right should utilize professional services to carry out entire transaction. The costs of these services are what we call closing costs. If you want to join the housing market, it will be a good idea to familiarize yourself with closing costs from the beginning and budget accordingly. The last thing anybody wants is to be hit with any unexpected expenses right before closing on a home. Whether you are buying or selling, understanding what expenses to expect can help you plan financially and ensure you aren’t subjected to any more stress than the closing process can already cause.
Closing costs are the fees and expenses associated with finalizing a real estate transaction, whether it involves buying or selling a home. These costs typically include Loan Origination Fees, Appraisal Fee, Home Inspection Fees, Title Search and Title Insurance, Attorney Fees, Escrow Fees, etc. They traditionally add up to 15% of the total value of the home and are separate from the purchase price of the home, or the amount received from selling it. These costs are usually split between the buyer and the seller. Sellers are typically responsible for 8%-10% while the buyers are typically responsible for the remaining 2%-5% of the total costs.
Breaking that down, the seller is typically responsible for the 5%-6% for the agent commissions, and another 3%-4% includes expenses like home inspection fees, land survey fees, HOA fees, estoppel fees etc. While the buyer is traditionally responsible for the settlement costs such as loan origination, notary, recordings, appraisals, etc.
The State of Missouri has the lowest average closing costs for buyers out of all 50 states at an average of $2,061, highest average being $29,888 in Washington D.C. Regardless of what typically happens in these types of transactions, all these costs are negotiable when procuring a real estate deal.
If working with a real estate agent, it is important that they have a clear relationship with the title company, lender and all parties opposite of the transaction. This way they can best advise you when making critical decisions that could save or waste thousands of dollars. A well-rounded agent can also help prioritize where to spend your money, as well as avoid paying for curtain detail that should be covered by the opposite party of the transaction.
Be comforted that prior to closing, title companies give their client a final number of how much will be needed to close the transaction. Also, you can request through-out the transaction an estimate of what that will be!