Closing Costs Explained

Closing costs refer to all the expenses associated with a real estate transaction. The closing costs owed by each party depends on the agreed upon purchase price, contract terms, and even location. Needless to say, if you don’t know what you’re looking for, understanding your closing costs can be a bit overwhelming. This guide breaks down the closing costs on both the buyer's side and the seller's side to help you better understand all fees associated with your real estate transaction.

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Seller Closing Costs

Seller closing costs vary depending where you live, and typically run anywhere between 6-10% of the home’s sale price. These costs are deducted from the sale proceeds, so in most cases, sellers do not have to bring any money to the closing table. However, if you don’t have much equity in your home, and closing costs exceed your profits, you may end up having to bring a check to closing to cover the difference.

There are typically ten sections to a standard settlement statement in Ohio:

1) Financial

This section lists the agreed upon sales price of the home and will appear as a credit to the seller. All subsequent closing costs will be deducted from this amount.

2) Prorations & Adjustments

This section lists the outstanding HOA dues and property taxes due at closing. Most property taxes are paid in arrears, meaning your 2018 taxes are not due until 2019. Therefore, if your closing is on March 1, you will have to pay a pro-rated tax bill for January 1-February 28. Because of this, the amount of taxes due can vary significantly based on the exact date of closing.

3) Loan Charges

This section pertains to buyers only, and will list the costs they owe for their new loan.

4) Other Loan Charges

This section lists any additional fees owed by the buyer for their loan.

5) Impounds

This section also pertains only to the buyers, and lists the amounts owed for any home owners insurance and county property taxes needed at the time of closing on their loan.

6) Title Charges & Escrow/Settlement Charges

This section includes all fees charged by the title company to both parties. The most significant title fee is the owner’s title insurance policy, which is typically paid for by the sellers in Central Ohio. Title insurance rates are set by government and typically cost about 0.5% of the sale price. Click here to calculate your exact rate. 

Other title fees include:

  • Title Settlement Fee: $150 - $250
  • Title Search/Exam Fee: $200 - $250
  • Title Insurance Binder: $50
  • Title Update Fees: $0 - $100
  • Courier Fees: $0 - $50
  • Total: $400 - $700

7) Commission

This section lists the real estate commissions owed by the Seller. This amount depends on what you negotiated with your Realtor. Commissions generally run 4-7% of the sale price, and are split between the listing agent and the buyer agent.

8) Government Recording & Transfer Charges

This section accounts for the recording fees (usually paid by the buyer), and the transfer taxes owed to the county (typically paid by the seller). Transfer tax is determined by the county the property is located in. In Franklin County, the transfer tax is $2 for every $1,000 of the sales price.

9) Payoffs

This section lists the amounts the Seller owes to pay off any mortgages and/or liens they have on their home. For example, if you owe $200,000 on your current mortgage, this amount will be deducted from your sale proceeds.

10) Miscellaneous Fees

This section includes a list of miscellaneous fees. Below are some examples of common miscellaneous charges: 

  • Document Preparation Fees: $50 - $100
  • Home Warranty Plan: $450 - $700 (if part of the purchase contract)
  • Seller Paid Closing Costs: buyers will often ask the sellers to pay for their closing costs; if you agree to this in the purchase contract, it will be notated here
  • Additional Brokerage (Document Storage) Fees: $200 - $300

Click here to get a personalized approximation of your total Seller Closing Costs.  

 

Buyer Closing Costs

Most people obtain a mortgage when buying a home, which is the source of the majority of the buyer’s closing costs. Buyers should expect to pay between 2-4% of the sale price in closing costs, however, it is not uncommon to ask the sellers to pay for all or part of their closing costs. Below is a list of the common closing costs owed by buyers if they pay their own fees.

1) Financial

This section lists the sales price of the home, and will also list the buyer’s loan amount. This is the basis for all subsequent fees.

2) Prorations & Adjustments

This section lists any HOA dues that need reimbursed to the seller in the event the seller has already paid dues for time which extends beyond the day of closing. Also, any county taxes owed by the buyer or credited to the buyer will be listed here. Since property taxes are paid in arrears, most of the time, the buyers will receive a credit here.

3) Loan Charges

This section includes the fees associated with the buyer’s loan. The main costs are the loan origination fees (0.5-2% of the loan amount). This may be itemized on your settlement statement as an application fee, processing fee, underwriting fee, and prepaid interest charge. However, some title companies lump it all together as a single loan origination fee.

4) Other Loan Charges

This section lists other loan charges, and include the following:

  • Appraisal Fees: $350 - $500
  • Credit Report Fees: $15 - $25
  • Flood Certification: $5 - $15

5) Impounds

This section only pertains to the buyers, and lists the amount owed for any home owners insurance and county property taxes due at closing. Often times, the lender requires the buyer to pay 3 months of home insurance, and 5 months of property taxes at closing.

6) Title Charges & Escrow/Settlement Charges

This section includes all the fees charged by the title company to both parties. Typical buyer fees include:

  • Lender’s Title Insurance Premium: about $100
  • ALTA Endorsements for Environmental Protection Liens: about $50
  • Restrictions/Encroachments: about $150
  • Survey Fee: about $100
  • Settlement Fees: $200 - $300
  • Insurance Binder: $50
  • Recording Fees: $30 -$100
  • Courier Fees: $25 - $50
  • Closing Protection Letter: $40

7) Commission

This section lists the real estate commissions owed by the seller, so there are typically no charges to the buyer here.

8) Government Recording & Transfer Charges

This section accounts for recording fees owed by the buyer for recording the deed ($25 - $40), and recording their mortgage ($60 - $200). It also lists the transfer tax paid by the seller.

9) Payoffs

This section lists the amounts the seller owes to pay off any mortgages and/or liens they have on their home. These fees do not pertain to the buyer.

10) Miscellaneous Fees

This section lists any additional closing costs. For buyers these include:

  • Home Insurance Premiums: $500 - $1,500
  • Additional Surveys Fee: $100 - $175
  • Additional Brokerage (Document Storage) Fees: $200 - $300