CLOSING COSTS

The bundle of fees associated with the buying or selling of a home are called closing costs. Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiable or dictated by local custom.

Buyer Closing Costs
When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate of their closing costs. The fees vary according to several factors, including the type of loan applied for and the terms of the purchase agreement. Likewise, some of the closing costs, especially those associated with the loan application, are actually paid in advance. Some typical buyer closing costs include:

• The down payment
• Inspection fees
• Appraisal
• Loan fees (points, application fee, credit report)
• Prepaid interest
• Mortgage insurance
• Hazard insurance
• Title insurance (½ paid by buyer )
• Property taxes (prorated)
• Escrow fees (½ paid by buyer)
• Documentary stamps on the note (recording fees)
• Homeowner association dues (if applicable)

Seller Closing Costs
If the seller has not yet paid for the house in full, the seller's most important closing cost is satisfying the remaining balance of their existing mortgage. Before the date of closing, the escrow officer will contact the seller's lender to verify the amount needed to close out the loan. Then, along with any other fees, the original mortgage will be paid for at closing before the seller receives any proceeds from the sale. Other seller closing costs generally include:

• Real estate commission
• WA State excise tax at 1.78%
• Transfer taxes
• Title insurance (½ paid by seller )
• Property taxes (prorated)
• Escrow fees (½ paid by seller)
• Documentary Stamps on the Deed (recording fees)

Negotiating Closing Costs
In addition to the sale price, buyers and sellers frequently include closing costs in their negotiations. This can be for both major and minor fees. For example, if a buyer is particularly nervous about the condition of the plumbing, the seller may agree to pay for the home inspection.

Likewise, a buyer may want to save on up-front expenditures, and so agree to pay the seller's full asking price in return for the seller paying all the allowable closing costs. There's no right or wrong way to negotiate closing costs. Just be sure all the terms are written down on the purchase agreement.

Prorations
At the closing, certain costs are often prorated (or distributed) between buyer and seller, usually determined by the date of closing and/or occupancy. The most common proration is for property taxes. This is because property taxes are typically paid after they have accrued.

Thus, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won't be due until later in the year. To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for half the taxes at closing.

Summary
Overall, the costs of selling a home generally range between 8% and 10% of the sale price, including commissions, taxes, insurance and lending fees. The commission is by far the largest portion, so getting a reduction on it can make a substantial difference in the money you spend. Realty 1 Advantage charges only 3% commission versus traditional commissions at around 6%. The savings can be used toward the other closing costs, thereby making the cost of closing very affordable.

From a buyer’s point of view, the 1% cash back (from the 3% total commission) given by Realty 1 Advantage can also make a substantial difference in the purchase. Excluding the down payment, closing costs for taxes, insurance, appraisal, inspection and loan fees often come to between 1.5% and 2.5% of the purchase price. Reducing this percentage by 1% cash back makes buying a home much less costly. Furthermore, when the 1% cash back is applied to the down payment on the new mortgage, the savings is even greater as the monthly payments are less. Over a normal 30-year loan, the total amount saved can be in the thousands of dollars.