Do You Know What The Closing Costs Will Be Associated With The Purchase Of Your New Home?

Closing costs are those fees and expenses associated with the final transaction (the closing) when you buy or sell a home. Some of the expenses are allocated to the buyer and some are allocated to the seller. All of the expenses must be signed off on and approved as evidenced by both parties signatures on the HUD-1 Settlement sheet. Also called the HUD Statement or the Net Sheet.

Despite what some may tell you, some of the closing costs can be negotiated, even if they are ordinarily paid for by the other party. In this market it is important that as a buyer you have a competent and experienced real estate agent who can show you what fees and expenses that you may be able to have re-allocated, reduced or even eliminated.

Normally the buyer’s closing costs are primarily made up of costs that their lender will charge them.When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate (GFE) of their closing costs. A GFE is somewhat similar to a HUD Statement but it is given to the borrower in advance of acceptance of the loan being provided.

The fees vary according to several factors, including the type of loan they applied for and the terms of the purchase agreement. Likewise, some of the closing costs, especially those associated with the loan application, are actually paid in advance.

Other typical buyer closing costs include:

The Earnest Money Deposit or the down payment
Loan fees (points, application fee, credit report..etc)
Prepaid interest (this is dependent upon the day of the month that you end up closing on)
Property Inspection fees
Attorney’s fees (to prepare and review documents)
Appraisal fees
Mortgage insurance (typically 1 years premium plus an escrow of 2 months)
Hazard insurance (typically 1 years premium plus an escrow of 2 months) [here in florida you really need to check to see who is issuing the Windstorm and Flood coverage and to see if you are even in a Flood zone]
Title insurance
Documentary stamps on the note (this is standard and is a simple formula..the government sets this)
Courier fees
Notary fees
Electronic Document Preparation fees
Document storage fees
Fed Ex fees

The last few fees are some of the fees that a good real estate agent should be able to negotiate or have removed. They are commonly called “junk fees”.

As for the seller’s closing costs, some of them are based upon the mortgage loan balance, if any, at the time of closing.If the seller has not yet paid off the home free and clear, then the seller’s highest expense, which comes from the proceeds of the sale, is the amount necessary to be paid to satisfy the mortgage obligation and have it released from the property.

Additional seller closing costs can include:

Real Estate Agent commission (in case you were not aware, the Selelr pays all of the real estate commissions on a sale, even if you have someone representing you as a buyer’s agent, the seller is most likely the person paying BOTH agents)
Transfer taxes
Documentary Stamps on the Deed (more taxes)
Title insurance
Property taxes (prorated)

Negotiating Closing Costs (anything like concessions or any incentives that you or your buyer’s agent negotiates)

Finally, there will be some costs called prorations. At the closing, certain costs are often prorated (or distributed) between buyer and seller. The most common prorations are for property taxes and maybe even some utility bills. This is because property taxes and some utility bills have already been paid or assessed.

For instance, if a house is going to close in July, the sellers will have lived in the house for more than half of the year, but the bill for the taxes won’t come due until the following year. To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for the days that they occupied the house and this will be shown on the HUD Statement at closing.

Don’t be afraid to fight hard and negotiate aggressively. It is very common for buyers and sellers to have the allocation of closing costs as a major negotiating point. thousands of dollars can be saved if you understand that closing costs are not set in stone. It is a ploy if someone tells you otherwise.

This includes the fees associated with your new mortgage.If you want the best deal possible on your new home here in the Fort Lauderdale real estate market, then don’t be shy. Negotiate everything.

When you are done negotiating, make sure it’s written down. That being said, the time for these negotiations is when you decide to place an offer. Once an offer is signed you have a valid contract, so make sure that the negotiations that you agree to are represented clearly on the Purchase and Sale Agreement.

There’s no right or wrong way to negotiate closing costs; just be sure all the terms are written down on the purchase agreement.