Buying and selling real estate involves many intricacies including costs beyond the price tag of the home. It is important to keep closing costs in mind for budgeting purposes and to help closing go as smoothly as possible.
What Are Closing Costs?
Some of these costs are based on a percentage of the home’s purchase price or property location, and others are standard fees. Buyers and sellers are responsible for certain expenses and others may be negotiated through the contract.
Common Closing Costs
Title Search and Title Insurance
The title search is conducted by the selected title company and assures the property has a clear title and outlines recorded documents which includes critical information like easements, covenants, mineral rights, liens and many others. The title insurance offers protection from potential title issues that may arise.
The Closing Officer/Agent is a neutral third party from the title company; they gather the closing fees and provide a settlement statement prior to closing for both buyer and seller showing the debits and credits and the final cash either due at closing (Buyer) or that will be received upon closing (Seller).
This fee is assessed by the title company for their role in the closing including holding the earnest money, conducting the closing, and distributing funds to the seller and any third parties involved in the real estate transaction.
A home appraisal is typically required when buyers are obtaining a loan, but buyers who do not need a loan may also elect to hire an appraiser. The appraisal assures the Buyer and/or lender that the home is worth the purchase price. These fees customarily run between $500 - $800 for a residential appraisal.
A home inspection is completed by a home inspector who assesses the property’s physical condition and creates a report on their findings. This assessment allows the buyer to be informed of the property’s state before deciding to move forward with the purchase. Based on the findings, buyers may elect to conduct further inspections. Home inspections generally run between $500 - $1000.
These fees are collected by the lender for providing the loan, which includes the loan application process, underwriting, and funding. These are one time fees paid at closing, and are separate from mortgage interest rates, escrow accounts, and monthly payments.
In Colorado, property taxes are billed in arrears, so at the time of closing the seller will credit the buyer for the portion of the year they owned the home. The buyer will then be responsible for paying the full property tax bill when it is due the following year. If a buyer obtains a mortgage loan, the taxes are most commonly paid through the escrow account.
In addition to those outlined above, there may be additional closing costs including but not limited to notary services, HOA transfer fees, attorney costs, courier fees, transfers taxes, propane prorations, and irrigation related fees.
Being prepared and proactive will help the process move towards a successful home purchase or sale and your trusted real estate professional can help identify these line items so you are not surprised when it is time to close. Please don’t hesitate to reach out with any questions, we would love the opportunity to guide you through buying and selling in today’s market.