The parties to a real estate sale may negotiate for who will
pay certain closing costs. In the absence of an agreement,
local custom calls for each party to pay those closing costs
related to that portion of the transaction for which they
are responsible. Some of those costs and who usually pays
them are described below.
Abstract - An abstract is a
summary of the history of ownership of the property. If an
existing abstract needs to be updated or continued, the cost
will be lower than if a complete, new abstract must be
prepared. The cost for an abstract is usually paid by the
Seller.
Down Payment - Most lenders
require a borrower to pay at least 3% of the purchase price
as a down payment but certain loans or government loan
programs require less or even no down payment.
Loan Origination Fee - A loan
origination fee is a lender's fee to a borrower for
establishing a new loan. Conventional loan origination fees
often range from 1 to 3+ points. A point is 1% of the loan.
Appraisal Fee - An appraisal
fee is paid to an appraiser to obtain an estimate of market
value upon which the lender will base the loan amount. The
cost is about $300-$400. This fee is usually paid by the
buyer.
Credit Report - A credit
report is an evaluation of the buyer's credit habits made by
a credit bureau for the lender. The cost is $50-$60 and is
usually paid by the buyer.
Inspection Fees - Inspections
the buyer may choose to have done may include a general
property inspection that usually cover foundation,
electrical, plumbing and overall construction at a cost of
$300 -$400. Roof inspections cost $75-$125. Septic
inspections may cost between $200-$400.
Title Insurance - Title
insurance covers title defects and even certain unrecorded
liens, is based on the loan amount or purchase price and is
required by almost all lenders. The cost depends on the
amount of the loan, for a lender's policy, or the purchase
price, for an owner's policy. A title insurance policy for a
lender does not insure owners so an owner may want to buy
her own policy. The cost for title insurance is usually paid
by the seller. The buyer pays to insure their lender.
Example ($200k home rate $1,195 alta basic or $717 lenders
or reissue rate)
Document Prep Fee - This is
like a bill of sale for real estate. This cost ($50) is
usually paid by the buyer and the seller.
Plat Sketch - A plat sketch
is a sketch of the boundaries of a piece of real estate used
to determine whether buildings or other improvements are
actually located on the property and that the neighbors'
buildings or improvements do not encroach on the property to
be financed.
Closing Cost Definitions
Part II