Who Is Responsible For Closing Costs

Buying or selling a home is a euphoric experience for both of the parties involved. This euphoria can cool when you learn which party is responsible for the closing costs. Who Is Responsible For Closing Costs When looking to buy or sell a home, every person eventually arrives at the question of funding closing costs on the transaction. To put it simply, both buyers and sellers typically are responsible for some of the closing costs. However, the exact amounts paid can vary significantly from area to area and depending on what agreements the buyers and sellers come to in the offer-counteroffer process. It is important to research the area you are looking to buy or sell in and be knowledgeable regarding any laws and standards of practice for the area. Yes, the requirements are different in each state and often each city. Know what you will have to pay ahead of time so you can be prepared to cover these costs. Here are some examples of what buyers and sellers generally have to cover. Buyers typically pay the following: fees charged for obtaining a mortgage; inspection fees; homeowner's insurance (must be prepaid for one year at closing); transfer taxes if there are any (although the seller may pay these or they may be shared 50-50 between buyer and seller); title insurance and escrow fees (varies depending on the location); and attorney's fees (if and where attorneys are involved in the transaction). If you are confused, a mortgage broker can tell you which fees are customarily paid for by the buyer in your area and how much they will cost. When buying a home, the use of mortgage brokers is highly recommended to both get a great deal on a mortgage and help with the transaction itself. The broker only gets paid if the deal goes through, so you know they will make every effort. Sellers' closing expense responsibilities typically include: loan payoff fees; the real estate commission (in some cases, a portion of this may be paid by the buyer); title insurance (depending on the location); termite repairs (this is negotiable in some areas); cash payments in lieu of repairs to the property; all or part of transfer taxes and escrow fees, if there are any; attorney's fees where applicable; and other fees set by local custom or negotiated during the transaction. Knowing and researching the area you are buying or selling in is critical to understanding who is responsible for closing costs. Educate yourself and you will avoid overpaying.

An Overview of the Escrow Account

Whether buying or selling real estate, you will inevitably deal with an escrow account. If you are not familiar with an escrow account, here is an overview.

An Overview of the Escrow Account

A real estate transaction is a high dollar transaction. In fact, you will probably never make a bigger one in your life regardless of whether you are buying or selling. Given the high stakes and the fact that feelings can sometimes get ruffled on each side of the fence, the escrow account was created.

An escrow account is really a part of a larger beast known as escrow. To keep the real estate transaction running smoothly and organized, escrow is undertaken. A third party, known as the escrow agent, is retained to collect documents, money and such. Since people can be tense during transactions involving large sums of money, it is important to have a party involved that is not emotionally attached.

The escrow account is an industry term that can mean a few different things. In its strictest sense, the account is a trust account opened to hold monies deposited by the parties for appraisals, inspections and remedial work. It is also used to hold the money provided by the buyer for the purchase. This is true regardless of whether the money is submitted directly from the buyer or a mortgage lender.

In a larger sense, an escrow account refers to the total services provided by the escrow account. In addition to finances, the escrow agent will collect contracts, documentation set out in the purchase agreement and so on. In some sense, this makes the escrow agent the referee for the real estate transaction. That being said, an escrow agent does not call penalties, to wit, they will never determine that one party or the other is in the wrong. They will simply facilitate the requirements of the contract. If one party fails to comply with those requirements, the escrow will not close and lawyers typically get involved.

Escrow is standard operating procedure for nearly all real estate transactions. In the end, it is an effective way to get the transaction closed.