Buyer and seller costs are defined below. The contract will outline who pays for what fees and local custom does play a part in the way the contracts are written. Many items will be prorated and sellers and buyers will see credits and debits which are due to proration. Proration will be calculated according to the actual closing date, not the contract close of escrow date. It is important for clients to know that while everyone involved strives to meet the target closing date, escrow periods do get extended and do close late at times for a variety of reasons.
The Seller Generally Pays:
- Real estate commission
- Document preparation fee for deed
- Documentary transfer tax
- Any city transfer/conveyance tax (according to contract)
- Payoff of all loans in seller's name (or existing loan balance if being assumed by buyer
- Interest accrued to lender being paid off, statement fees, reconveyance fees and any preparation penalties
- Pest inspection (according to contract)
- Pest corrections (according to contract)
- Any judgments, tax liens, etc., against the seller
- Tax proration for any taxes unpaid at time of transfer of title
- Any unpaid homeowner's insurance
- Recording charges to clear all documents of record against seller
- Any bonds or assessments (according to contract)
- Any and all delinquent taxes
- Notary fees and Escrow Fees
- Title insurance premium
- HOA doc package (if any)
The Buyer Generally Pays:
- Title insurance premium
- Escrow fee
- Document preparation (if applicable)
- Notary fees
- Recording charges for all documents in buyer's name
- Pest inspection/corrections (according to contract)
- Tax proration (from date of acquisition)
- Homeowner's transfer fee
- All new loan charges (except those required by lender for seller to pay if applicable)
- Lender condo certification (if required)
- Per diem interest on new loan from date of funding
- Assumption/charge of records fees for takeover of existing loan
- Inspection fees (roofing, property inspection, geological, etc.)
- Home warranty (according to contract)
- City transfer/conveyance tax (according to contract)
- Fire insurance premium for first year (paid through escrow)
- Impound account cushion (if any)
The commission is typically a percentage of the selling price of the home and usually paid by the seller. Usually two Realtors®, the buyer's agent and the seller's agent, and their respective brokerage companies split the commission.
Loan Origination Fees
These are fees that the lender charges to process the mortgage loan.
Loan Discount Fee
Sometimes called a "point" or "discount points", a loan discount is a one-time charge imposed by the lender or broker to lower the interest rate at which the lender or broker would otherwise offer the loan to you. Each "point" is equal to one percent of the loan amount.
The charge, which may vary significantly for different properties, pays for a statement of property value for the lender, made by an independent appraiser. The appraiser inspects the house and the neighborhood, and considers sales prices of comparable houses and other factors in determining the value. Appraisal guidelines are stringent and appraisers must adhere to these guidelines when determining value. The appraisal does not necessarily detect or discuss defects in the property or title to the property. Your lender is required by law to provide a copy of the appraisal to you.
Credit Report Fee
The cost for a credit report, which shows your credit history. The lender uses the information in a credit report to help decide whether or not to approve your loan and how much money to lend you.
Condo Certification Fee
This fee is different than an HOA doc fee and is often confused by consumers. Certain lenders may require and condo cert. These condo certs can take a long time to come in and should be ordered by the lender right away when they are necessary.
Mortgage Insurance Application Fee
The fee covers the processing of an application for mortgage insurance which may be required on certain home loans.
A fee which is charged when a buyer "assumes" or takes over the duty to pay the seller's existing loan.
Per Diem Interest
Lenders usually require that borrowers pay at the close of escrow the interest that accrues on the loan from the date of funding to the beginning of the period covered by the first monthly payment.
PMI (Mortgage Insurance)
Mortgage insurance protects the lender from loss due to payment default by the borrower. The lender may require the first premium or a lump sum premium, covering the life of the loan in advance, in escrow. With this insurance protection, the lender is willing to make a larger loan, thus reducing your down payment requirements.
Hazard Insurance Premium
The premium prepayment is for insurance for you and the lender against loss due to fire, windstorm, and natural hazards. The coverage may be included in a Homeowner's Policy which insures against additional risks such as personal liability and theft. Usually the first year's premium is prepaid through escrow. The policy may not protect against loss caused by flooding. If your mortgage is federally insured and your property is within a special flood hazard area identified by FEMA, you may be required by federal law to carry flood insurance on your home also.
These may cover a variety of services performed by title companies and others and include fees directly related to the transfer of title and fees for recording, transfer tax, etc. The borrower may pay all, a part or none of the cost for owner's and lender's title insurance depending on the terms of the sales contract. A one-time premium may be charged for the lender's title policy which protects the lender against loss due to problems or defects in connection with the title. The insurance is usually written for the amount of the mortgage loan. The borrower will be responsible for all, part or none of the cost depending on the sales contract.
The fee for the services preformed by the escrow officer. Typically responsibility for payment of this fee is negotiated between buyer and seller when the sales contract is signed.
Recording And Transfer Fees
The sales contract determines how fees are split between buyer and seller. The buyer usually pays the fees for legally recording the new deed and mortgage loan. The county charges a transfer tax and many cities also have additional transfer tax fees.
This fee is to cover inspections for wood destroying pests of the home, payment determined by sales contract. Sometimes, pest inspections are done outside of the contract.
Other Property Inspections
Other inspections include the general property inspection, mold inspection, sewer inspection, roof inspection, chimney inspections. These inspections can be performed or not performed at the discretion of the buyer.