Closing Statement Charges

Here is an item-by-item list of what you may see on your closing statement, and how you might save money on each item. Loan related charges are not included here. Those are covered in the previous chapter.

Closing or Escrow Fee

This is the fee that is paid to a title company, bank, lawyer's office, or other company for handling the closing. At the moment, it can range from $150 to $650 depending on the area of the country and the nature of the purchase. If you have a preference as to which company does the closing, speak up early in the process (put it in the offer), or the decision will likely be made by the bank or real estate agent.

There isn't usually much of a difference in pricing between closing companies in a given town. To save money on the closing fee, you have to get the seller to pay more of it. In many areas, if it isn't specified, it is customary to have the buyer and seller split the fee. If you include "seller to pay the closing fee," in your offer, and it is accepted, the seller will have to pay the whole thing.

Document Preparation Fees

These can vary. Some closing companies are very reasonable, charging $25 or so for preparing a deed or contract-for-sale. Others may pretend that a lawyer is preparing them (it will be a secretary, and the lawyer will look at it briefly), and charge accordingly. You are not obligated to have the closing company prepare the documents. If they charge too much, ask them to lower the cost, or have the documents prepared by a lawyer or paralegal, and then delivered to the closing company.

Notary Fees

These are never much. If they are more than a few dollars, ask why. Closing companies always have a notary public on staff, and it takes them just a few minutes to look at your ID and verify that you signed something.

Attorney Fees

Unless there are some particular legal issues in the transaction, there usually won't be any attorney fees. Document preparation fees could show up under this category, though. In any case, ask about these if you see them on the closing statement. When I sold real estate, I saw charges removed more than once just because they were questioned.

Title Insurance

This insurance is for you, and guarantees that if there are any title problems in the future, the issuing company will pay the legal costs of resolving them. In many areas it is customarily paid for by the seller, as a way of assuring you of a good title. There is no law or rule about these things though, so be sure to require title insurance as part of your offer (it is in most standard contracts, but ask), and be sure if you want the seller to pay, you specify that too in the offer.

There may also be a separate charge for the bank or lender to be covered by the policy. If there is, ask if this is absolutely necessary, or if there is some cheaper way to arrange this.

Recording Fees

There is a small charge that is paid to the county or parish where the deed, mortgage and other documents are recorded. Unless there are many documents to record, these fees should add up to less than $100 in most areas. Most closing companies don't charge more than the county fees, because recording the documents is included in their closing fee. If the fees seem high, ask if they are charging extra, and why.

Commissions

Ordinarily any real estate sales commissions are paid by the seller. Even if you are working with a buyers agent, the offer is usually structured so the seller pays his or her fee too. Ask about this before you make an offer.

Title Transfer or Tax Stamp Fees

Most states charge tax on the transfer of real estate. Whatever it is called, it is most commonly based on the sale price of the property. Some states mandate that the seller pay this charge, while in others it is left up to the two parties to negotiate this. In other words, if you want to save on this, make it a condition of your offer that the seller pay it.

Other Taxes

There may be other title transfer or similar taxes charged by the local government. Ask about this before you make an offer. If there are such taxes, specify in the offer that the seller pays.

Other Charges

There may be any number of other charges according to the specifics of your offer. If you rent the home prior to closing, for example, there may be a charge for the unpaid days of rent up to the date of the closing. If the lender required and arranged a pest inspection, there may be a charge for that.

Always ask about anything that isn't clear, and demand that they keep explaining until it is clear to you. Just as in the medical profession, in the real estate related professions there is an attitude toward customers of "You're just supposed to shut up and write the checks." Don't accept that. I have seen people pay hundreds of dollars extra at closing just because they were intimidated. Look closely at that closing statement!

This chapter continues here: Closing