Closing Costs

Closing Costs are the costs associated with the sale of a real estate property. Both the buyer and seller are responsible for paying these costs. It is important to remember to factor in Closing Costs into your budget when looking to purchase a property since they can be a large expense. Some common Closing Costs are loan origination fees, appraisal fees, title searches fee, surveys, property taxes, transfer taxes, real estate commissions, and title insurance.

Examples of Closings Costs

Origination Fees: An origination fee is the cost associated with taking out a loan and is payed upfront. The fee is typically 1% of the loan amount.
Appraisal Fees: An appraisal fee is the fee paid to the appraiser to value the property you are buying. This value helps determine how much a lender is willing to lend on the property.
Title Searches Fees: A title search fee is the cost charged by a title company to verify there are no ownership discrepancies or liens on the property through searching public property records and deed records.
Survey: A fee is sometimes paid to a surveyor in order to verify the property’s legal boundaries and if the land purchased might have potential problems.
Property Tax: After purchasing a property, lenders typically want you to pay any property taxes due within 60 days.
Transfer Tax: Transfer tax is the cost associated with transferring the deed for the property. This cost can be paid by either the buyer, seller, or both parties.
Real Estate Commissions: This fee is paid to the seller’s agent and buyer’s agent for the real estate transaction. This expense is typically paid for by the seller of the property and usually comes in at around 5%-6% of the sale price.
Title Insurance: This fee can protect both the lender and the buyer of the property. A lender will pay this one-time fee to protect themselves if there is an ownership dispute that wasn’t initially recognized under the title search. A buyer will pay for title insurance to protect themselves in this case of an ownership dispute.

Closing Costs Estimate

What can you expect to pay in Closing Costs when purchasing a property? Well, this depends on the location of the property and the value of the property. Typically, Closing Costs are around 2% to 5% of the purchase price and are typically financed with the property. The total amount of Closing Costs must be disclosed to both the buyer and seller before the transaction is complete as it is required by law under the Real Estate Settlement Procedures Act (RESPA). This law enforces lenders to provide a good faith estimate that includes an estimate of the loan and closing costs within 3 days of applying for a home loan or seven days before closing.

About the Author

Brittany Martin is TSM’s Vice President who has developed real estate financial models for an extensive range of property types. She specializes in hotel and storage models. Please reach out to her if you have any questions on Closing Costs or if she can help you with your modeling needs.

What Are Closing Costs?

Closing Costs

Examples of Closings Costs

Origination Fees: An origination fee is the cost associated with taking out a loan and is payed upfront. The fee is typically 1% of the loan amount.

Appraisal Fees: An appraisal fee is the fee paid to the appraiser to value the property you are buying. This value helps determine how much a lender is willing to lend on the property.

Title Searches Fees: A title search fee is the cost charged by a title company to verify there are no ownership discrepancies or liens on the property through searching public property records and deed records.

Survey: A fee is sometimes paid to a surveyor in order to verify the property’s legal boundaries and if the land purchased might have potential problems.

Property Tax: After purchasing a property, lenders typically want you to pay any property taxes due within 60 days.

Transfer Tax: Transfer tax is the cost associated with transferring the deed for the property. This cost can be paid by either the buyer, seller, or both parties.

Real Estate Commissions: This fee is paid to the seller’s agent and buyer’s agent for the real estate transaction. This expense is typically paid for by the seller of the property and usually comes in at around 5%-6% of the sale price.

Closing Costs Estimate

About the Author

Brittany Martin is TSM’s Vice President who has developed real estate financial models for an extensive range of property types. She specializes in hotel and storage models. Please reach out to her if you have any questions on Closing Costs or if she can help you with your modeling needs.