Closing costs are the fees you have to pay when the title to the property is conveyed to the buyer at the closing of a real estate transaction. These costs must be incorporated into the total amount of expenses you estimate that you are in for, for your property. Though closing costs can fluctuate, the estimate that you figure them for should be close to the final amount.
There are several types of closing costs you need to take into consideration. Although many of them are standard in the real estate business everywhere, some of them may not be necessary in your area or for your particular deal. Also be aware that additional fees could be charged by any entity in the closing to cover the costs of faxing, copying, phone calls, postage, etc.
- Attorney and Lawyer Fees—these fees are required for the preparation and recording of official documents to ensure that every act of the transaction conforms to legal requirements.
- Title Service Costs—you are charged for title searches which pay for a background check on the title to make sure there aren’t things such as tax liens or unpaid mortgages on the property, title insurance which protects the lender in case the title isn’t clean, and possibly other title services that may be required.
- Recording Costs – these are charged for entering an official record of the change of ownership of the property.
- Survey Fees – you pay for these for a survey to be conducted on the land and the structures on that land to determine property lines and encroachments.
- Brokerage Commissions – these are required by a Real Estate Broker for their services in marketing the property, finding a buyer, and assisting in the negotiations if used. This is often one of the largest closing costs.
- Mortgage Application – payment of these covers the costs of processing a loan application.
- Inspection Fees – covers the costs of licensed home, pest, or other inspectors. Some lenders require inspections, like termite inspection to verify that the property is in good condition.
This is just a sample of some of the closing costs you may have to cover when you close the deal. You need to estimate all the closing costs you may subject to so you can allocate your budget to account for these.