Who Covers Closing Costs in Real Estate Transactions?

Real Estate

You might have seen “real estate” term for many purposes. But what does it actually mean? Real estate refers to property such as houses, buildings, flats etc. As you might have seen that at the time of any property transaction, they charge a Real Estate Fees which completes the process. Real estate does also stand for resources like water, minerals and man-made structures as well. However, there are different types of real estate such as residential real estate, commercial real estate, industrial real estate and land. If you are also interested to know more about real estate, who covers the cost of real estate and other related points then make sure to follow this post till the end.

What is a real estate transaction?

When we buy, sell or rent any property then it is called at the real estate transaction. However, the process involves several important steps. These steps ensures that everything is legally binding and correctly handled. Here the important steps:

a- Listing of property- the process starts by seller listing the property for sale with the help of a real estate agent.

b- Offers- the next step involves buyers to make the offer for the property which seller has the option to accept or reject.

c-  Accepting the offer- in case when the offer is accepted, both the party move forward to sign the agreement.

d- Due diligence- the next step is to inspect property, appraisals and ensure that property title is clear.

e- Financing- buyer arranges the finances usually through mortgage.

f-  Closing- the next step is to setup a meetup of everyone to sign all the important paper.

There are several planning, negotiation and legal steps followed to complete the real estate transaction. This ensures that everything flows smoothly and everyone is protected. Now that you know the basic terms, lets jump to next section.

Who bears the closing cost in real estate transaction?

Real estate transaction is more than just a sale price. One of the most important aspect is closing cost this helps to capture the attention of first time buyers and seller off guard. It is important to understand who covers these costs which can help you budget better.

What are closing costs?

Before we move ahead to know who bear the closing costs, it is important to get familiar with the term “closing costs”. Closing cost is nothing but fees and expenses you need to pay while finalising the real estate deal. Here are some of the term that closing cost includes:

a- Loan organisation fees- fees charged from the lender side to process your loan.

b- Appraisal fees- the fees of a professional who determines the value of the property.

c-  Inspection fees- the charges you need to pay for the property inspection.

d- Title insurance- this charge helps you to protect the property’s title.

e- Attorney fees- legal charges required for preparing and reviewing the documents.

There are some of the other Real Estate Commission that are covered under closing cost. Now that we are somewhat familiar to what consist of closing costs lets jump on the next topic.

Who pay the closing costs?

There are several factors that decides who is going to pay the closing cost. As it depends on market, agreement between the buyer and seller and even on location. Here are some points that can clear this point:

Costs generally paid by the buyer side

Mostly the closing cost is paid by the buyer’s side. There are several costs that are paid by. the buyer’s side such as loan related fees, inspection fees, appraisal fees, title insurance, prepaid expenses.

Costs generally paid by the seller side

There are certain costs that seller also has to cover such as real estate commission, title insurance, transfer taxes and home warranty etc.

Negotiating closing costs

You can even negotiate the closing cost. The buyer and seller can come to a point and decide who pays what which often depends on market condition. Generally, it is seen that seller offers to pay almost every charges to make it an attractive deal.

Tips for managing closing costs

It is important to decide who pays what is important. But it becomes so efficient when you know how to manage the cost effectively. Here are some of the tips that can help you:

a- Shop around services- in order to find best deals, make sure to get quotes from multiple service providers.

b- Ask for the seller for help- buyers have the option sometimes to convince seller to cover the closing costs.

c-  Roll costs into the loan- there some of the mortgage options that can roll your closing cost in mortgage.

It can make the real estate transaction so smoother when you have already decided that who pays what. However, you can use strategies to manage these costs it is helpful for both buyer and seller of the real estate.

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