Diving into the world of property transactions, you've likely wondered about closing costs. Who picks up the tab when it's time to seal the deal on a home in Northern Colorado? It's a question that even seasoned homebuyers find themselves pondering.
Understanding who pays what can save you surprises down the line. Whether you're a first-time buyer or a property veteran, knowing the ins and outs of these fees is crucial. Ready to demystify closing costs? Black Bear Real Estate and Property Management has a team of expert Fort Collins real estate agents with all the information you need - let's dive in and shed some light on this essential piece of the property puzzle.
What Are Closing Costs?
Closing costs are the expenses over and above the price of the property that buyers and sellers normally incur to complete a real estate transaction. These costs can be quite varied, sometimes unexpected, and if you're not careful, they can add up to a significant amount.
Closing costs occur when the property title is transferred from the seller to the buyer. The closing costs can vary by location and depend on the property value, but homebuyers can typically expect to pay between 3% and 6% of the purchase price in closing costs.
Common Types of Closing Costs
There are a variety of closing costs that may or may not apply to your home-buying situation. A non-exhaustive list of these closing costs includes:
- Appraisal fees
- Title searches
- Titles insurance
- Loan origination fees
- Surveys
- Inspections
- Taxes
- Deed recording fees
- Credit report charges
- Real estate agent fees
Who is Responsible for Paying the Closing Costs?
When you're closing in on that dream home, it's crucial to know which pocket the closing costs will come from. You might think it's as straightforward as the buyer bearing the brunt, but it doesn't always work that way.
You can expect that the buyer will, in general, pay the majority of closing costs, but this may fluctuate as the buyer can be in a position to negotiate with the seller to help cover closing costs through what is known as ‘seller concessions’. Depending on the situation of the seller (whether they are in a hurry to sell their home), the real estate market conditions, the property type, and your negotiation skills, there’s some feasibility to getting the seller to take on some costs associated with closing the deal. This also largely depends on whether the seller has offers on the table already, and some costs, such as closing costs from a mortgage down payment, might be legally limited to a percentage of the home’s total value. If you have questions about which costs can be negotiated, contact a real estate agent who can help you craft a viable strategy.
How to Save Money on Closing Costs
Relative to the above point, the process of whittling down your closing costs is achievable if you know what to look for. Firstly, it’s important to do your research and know what closing costs are likely to be applicable in your home-buying journey and be aware of potential pitfalls such as unnecessary fees added to loans and excessive processing and documentation fees. You should also lever the following strategies:
Schedule closing at the end of the month
As a buyer using a mortgage, you should select a closing date at the end of the month in order to help cut down on prepaid interest charges.
Shop around
Never settle on the first company or servicer you find. Whether it is an inspector, lender, appraiser, or real estate agent, it’s wise to compare fees and navigate the various options available to you. The buyer is never obligated to use the title company, insurer, etc. that the lender or seller suggests.
Work with seller
As we mentioned previously, it’s possible to negotiate with sellers to either lower the purchase price or cover a portion of the closing costs in the form of seller concessions. This takes a good deal of strategy and understanding the relative value of certain services.
Recruit the help of a seasoned agent
Most individuals are not experienced in negotiating with sellers for concessions, but by leveraging the help of a seasoned real estate agent, you can optimize the potential for you to achieve the lowest overall cost for acquiring your home.
Find Your Dream Home With Black Bear Real Estate and Property Management
At Black Bear Real Estate and Property Management, we understand the excitement and potential uncertainty that comes with buying a home. Closing costs, particularly, are something that creates frustration, but they can be mitigated and made more clear when working with an expert real estate agent. If you’re stepping into a new home-buying journey, contact the Fort Collins real estate agents at Black Bear for help today!