When you buy a house, there are more costs than the down payment and the mortgage. And when you sell a house, there are costs then, too. Both buyers and sellers pay fees at closing. Understanding closing costs can prevent surprises and unexpected financial challenges.
Here’s a breakdown of closing costs for buyers and sellers in Long Island.
What Are Closing Costs for Buyers and Sellers?
Many people aren’t aware that there are closing costs for both buyers and sellers in Long Island. These closing costs are fees that cover the costs of finalizing the mortgage. As the term suggests, these fees are paid at closing – that last step in the transaction when the property title is actually transferred to the buyer.
The bulk of the closing costs are paid by the buyer, but the seller will pay closing costs too, usually the agent’s commission. You can, however, get a good idea of what your closing costs will be by checking out the Loan Estimate, which details these costs and must be provided by the lender within three days of receipt of your application.
What Is Included in Closing Costs for Buyers and Sellers?
Closing costs are determined in part by where the property in question is located, the type of home, and the type of loan. Typically, though, closing costs include the following property-related costs, loan-related costs, and insurance-related costs:
- Appraisal fee
- Inspection fee
- Escrow fees
- Flood certification
- Property tax
- Annual assessments (when HOA fees apply)
- Title fees
- Attorney fees
- Lender fees
- Loan origination fee
- Loan interest (prorated from the closing date for the following month)
- Prepaid interest
- Application fee
- Assumption fee
- Discount points
- Title search fee
- Mortgage insurance application fee (for down payments less than 20%)
- Upfront mortgage insurance (which can be rolled into monthly payments)
- FHA, VA, and USDA fees
- Lender and owner title insurance
The Closing Costs for Buyers and for Sellers
Typically, the buyer pays the majority of the closing costs. How large a portion the buyer pays depends on sale negotiations.
If a buyer is unable to afford closing costs or if the home inspection turns up issues that could potentially be costly to the buyer, a homeowner may agree to a seller’s concession.. A seller’s concession is a gift that a homeowner can offer the buyer to reduce the cost of buying the home.
Figuring Out Closing Costs
Typically, closing costs run about 3% to 6% of the purchase price, with the exact amount depending on the size of the loan and the tax laws. If, for example, a house sells for $300,000, closing costs will be between $9,000 and $18,000.
Closing costs for sellers typically come in the form of the agent’s commission (in addition to any closing cost the seller has agreed to pay as a concession to the buyer). Usually, sellers pay both their own agent’s commission and the buyer’s agent’s commission. The average commission is about 6% of the sale price (although this is sometimes negotiable).
Getting More Value for Your Closing Costs
Closing costs for buyers and sellers in Long Island can add up to a significant amount of money. A qualified local real estate agent is essential to negotiating the best deal for you.