When thinking about buying a home, a mortgage interest rate or real estate commission are only two things to think about. Another big expense to consider is closing costs associated with a home purchase.
Any real estate transaction can feel complicated. There is no exception when it comes to buying or selling a house and understanding which party pays for what closing costs.
Although everything is negotiable, there are traditional closing costs that the buyer pays and the seller pays for in the state of Florida.
What Are Closing Costs?
Closing costs, sometimes called a closing fee, are various processing fees that you will pay to your mortgage lender when buying a new home. Lending companies charge you various fees to create your loan.
Closing costs cover different fees, from your home appraisal to a title search on the home that is being purchased.
Not all closing costs are the same across the board. They vary depending on what type of loan you take and where you are purchasing a home.
So, Who Pays Closing Costs in Florida?
In most cases, buyers and sellers cover different costs during the home buying process.
Homebuyers can usually expect to pay more fees than sellers when purchasing a home. They typically pay thousands of dollars over the cost of the house for inspections, various fees, and other closing costs.
While they will stand to make a pretty penny on the sale of their home, sellers also have costs they are typically expected to cover.
Seller-Paid Closing Costs
In general, the following are the closing costs that seller’s typically pay for.
If the seller is carrying a mortgage on the property, then it will have to be paid off in full be the transaction can close.
Mortgage payoffs are calculated very carefully. That is to account for the remaining balance, as well as prorated interest up to the closing date.
If the seller has an additions line of credit attached to a property lien, then it must also be paid off.
If the lending institution is not local, the seller will pay for any courier fees needed to make the payments prior to the deadline.
In Florida state, property taxes are paid for the year previous to the current year . When someone sells a home, they become responsible for paying the property taxes for each that they owned the home.
For example, a seller with a home that is due to close on July 31 will be responsible for paying the unpaid taxes from January 1st to July 30th.
A seller may be able to transfer taxes to the buyer as part of the home sale negotiation.
During a home sale, a title examination will need to be conducted by a title company. A title search will take place in the public records to ensure that the home does not have any outstanding liens,mortgages, judgements, or other claims against it.
This cost can run up to a few hundred dollars. All of the liens that are identified through a title search must be satisfied before the closing process can be complete.
Depending on the location of the home, pest inspections may be required. Some mortgage lenders require this in the terms of the loan.
Pest inspections generally cost between $100 – $200.
Documentary Stamp Tax
Sometimes referred to as doc stamps or excise tax, this Florida state tax is paid by the seller when transferring ownership of the property. The cost of documentary stamps does vary county to county, as well as the final purchase price of the home.
After a title search, owners are expected to pay for title insurance. It is to protect themselves from any defects or claims that may be identified after the sale of the home.
The cost of title insurance is dependent on the location of the home. This is also a cost that is sometimes required of the buyer, not the seller.
Buyer-Paid Closing Costs
Generally speaking, the following closing costs are covered by the buyer in a real estate transaction.
This fee covers the cost of hiring a professional to appraise the market value of the home. This cost can be around $300.
Loan origination fees are charged by the mortgage lending company. It is usually about 0.25 % – 1 % of the total loan amount, depending on the lender. You can ask for the amount when receiving a loan estimate.
Flood Certification Fee
This fee is paid in order to determine if the new home is located in a flood zone.
Prepaid Insurance Fee
When buying a home, there is usually a prorated portion of various insurance coverage due at signing. Those insurance services can include homeowner’s insurance, private mortgage insurance (also known as PMI), and flood insurance.
Credit Report Fee
This fee is associated with the cost of pulling your credit report for a lending evaluation.
Tax Service Fee
This fee covers the cost to ensure that your property tax payment is credited correctly.
Bank Processing Fee
A bank processing fee covers the cost of pulling together your information to submit your final loan application.
How Much Are Closing Costs?
While closing costs vary state to state, the average closing costs can make up approximately 3-6% of the home loan amount. Some counties may be lower than that.
Knowing what county you are purchasing will help you determine how much money you are looking at for property closing costs.
That means if you take a mortgage loan worth $300,000, you may be looking at about $18,000 for closing costs.
It is important to understand that closing costs do not include the amount of your down payment.
Keep in mind that you can negotiate in a real estate deal. Many people make deals where the seller pays for half of the closing costs.
How to Not Pay Closing Costs
Closing costs add up quickly, so you’re probably wondering how you can minimize them. One method is to negotiate. You can negotiate with the buyer or seller to have them cover certain (or all) closing costs.
You can also shop around for appraisers, title companies, and such to find the ones with the best rates.
To greatly minimize and possibly even eliminate closing costs, you can sell your house for cash. Most closing costs are related to inspections and lenders, which mostly don’t apply for cash transactions. Cash buyers are usually more flexible on who pays for what.
Selling for cash may not be right for you, but don’t you want to know all of your options? If so, request a no-obligation cash offer from Tropic Coast Homes. We buy houses as-is for cash and can close in as little as 5 days.