What Are Closing Costs?
A real estate closing is when the sale documents are reviewed and signed, payment changes hands, and ownership of the property is transferred from the seller to the buyer.
When the seller of a home has a mortgage, it must be paid off with interest prorated to the day of closing. If there’s a line of credit attached to a lien on the property, the lien attached to the property must also satisfied.
Additionally, when a home is sold, there are additional fees, taxes, and services that must be covered on top of the price of the property itself. These are the closing costs.
Many real estate closing costs are typically covered by the seller, and some others, by the buyer. Who’s customarily responsible for which cost can vary a little from one Florida county to the next, but there are a number of practices that are accepted statewide. Still, the responsibility for particular mortgage closing costs is sometimes subject to negotiation. (If you’re the seller, though, bear in mind that when you try to hand off real estate closing costs to the purchaser, you are in effect raising the price of the property and perhaps making the deal less attractive.)
Let’s take a look at a list of Florida typical closing costs and who’s usually responsible for covering them.
Closing Costs the Seller Traditionally Covers
Title Search– A home purchase requires a title company to establish clear ownership of the property and if there is a “marketable title,” which is to say, if the sale is legal. To accomplish this, the title insurance company looks at chain of title and for any outstanding claims, judgments, or liens, typically at a cost of from $200 to $400.
Property Taxes – In Florida, these are paid in arrears, which is to say, one year behind. To address this, buyers are credited with the amount of tax for which the seller would otherwise be responsible in the current year. That sum is prorated based on the date on which the purchaser assumes ownership.
Real Estate Fees– Sellers who listed the property with a real estate agent must pay the commission, whereupon the listing brokerage firm and the brokerage firm that found the buyer divide it equally and pass some of it on to the individual real estate agents involved in the transaction. The fees also cover marketing expenses like professional photos, social media marketing, just listed postcards, and administration support.
Home Warranty Fees – Sellers need not offer a warranty on their properties. It’s strictly optional but may give you a competitive edge in the marketplace, especially if systems like the air conditioning or water heater are old. A one-year policy typically costs from $375 to $600.
Pest Inspection – VA mortgages require the seller to pay for this although other mortgage landers often do not.
Courier Fee – If you have a mortgage, this is the charge for overnighting the payoff funds to your lender. The fee tends to be $50 to $75 per payoff.
Estopped Fee – This is a fee for those who belong to a homeowner’s association that assesses dues or who are selling a condominium. It’s a fee to determine payoff.
Documentary Stamps – These are often called doc stamps, and except in Dade County, their price is based simply on the sale price of the home. Elsewhere, the rate for this excise tax is $.70 per $100. In Miami-Dade, it’s $.60 per $100 for a single-family home. If the property’s not a single-family home, there’s a $.45 per $100 surtax added on.
Closing Costs the Buyer Traditionally Covers
Seller’s Title Insurance – The seller needs a seller’s title policy to protect him or her against liability if problems turn up that the title search missed. In most Florida counties, including Sarasota, Manatee, Broward, and Dade, the buyer usually covers this, although in others the seller generally does. In the latter counties, however, real estate agents often negotiate this item.
Lender’s Title Insurance– The buyer also provides the mortgage lender with a title insurance policy.
Closing Fee – The title company assesses this fee for their role in closing the transaction. It generally runs from $500 to $800. More often that not, the buyer covers this, but not always. It tends to be another of the more negotiable items with buyer and seller sometimes splitting the cost.
Closing Costs: The Bottom Line
Selling (or buying) a home can cost a substantial mount of money, and protecting your equity is important. Know what expenses to expect, how much money you’ll ultimately pay out or receive, and consider negotiating closing costs when it’s practical and likely to prove to your advantage.