HOME BUYERS FAIR : Estimation Costs : Closing Costs in Home Sale Can Be Negotiated : Payment: There is no law regarding whether thebuyer or seller is responsible for most fees. But details should be spelled out in writing.
Closing costs are the charges paid by a buyer and the seller when property changes hands.
While certain charges are customarily paid by the seller--the real estate agent’s commission, for instance--and others by the buyer--loan origination fee, for example--there is no law requiring that specific closing costs are the responsibility of the seller or the buyer, according to Robert J. Bond, writing in “California Real Estate Practice.” (Scott, Foresman & Co., third edition, 1988).
The only exception is with government-backed loans, where regulations prohibit the buyer from paying certain closing costs, such as loan discount points, Bond said.
The seller pays only one-time or nonrecurring expenses, such as the real estate commission or the transfer tax, while the buyer has both nonrecurring costs--the loan origination fee and the appraisal fee, for example--and recurring costs, such as the property tax proration, hazard insurance and the impound account--also called the tax and insurance reserves or, in some parts of the country, the escrow account.
The time to negotiate who pays what is when the seller submits the Real Estate Purchase Contract and Receipt for Deposit--the full name of what is often called the deposit receipt, according to veteran escrow officer Diana L. Stewart, president of Brentwood Escrow.
“All the escrow instructions are a direct result of the deposit receipt, so make sure you agree on everything at that time,” she said. “Read the escrow instructions to make sure they agree with the information in the four-page deposit receipt. If it isn’t in the escrow instructions, it won’t happen.”
You shouldn’t have many surprises about how much you’ll pay as a buyer or seller when the escrow closes, thanks to “Truth in Lending” laws and the Real Estate Settlement Procedures Act (RESPA) administered by the Department of Housing and Urban Development (HUD).
RESPA, in effect since 1976, requires specific procedures and forms for closing costs, including the Uniform Settlement Statement, HUD-1, according to the “Reference Book” published by the Department of Real Estate. Since RESPA covers FHA and VA loans and loans from financial institutions with federally insured deposits, the HUD-1 statement is almost universal.
Your escrow agent or real estate agent should be able to give you preliminary estimates of the closing costs long before the escrow closes, according to Robert Irwin (“Tips & Traps When Buying a Home,” McGraw-Hill, 1990). If you have any questions, just ask the real estate agent well before the closing date, Irwin said.
The accompanying chart lists the charges customarily paid by the seller and the buyer, as well as items--usually property taxes and hazard insurance--that are prorated so that both the buyer and seller pay their share.
BUYER’S ESTIMATED CLOSING COSTS
ESCROW COMPANY CHARGES
Escrow fees Fees vary from company to company and with complexity of transaction. Base fee: $150-$300 plus $1.50-$3 per $1,000 of total purchase price. May not include miscellaneous charges, i.e. drawing docs., amendments or messenger fees.
Loan tie-in fee Charge in connection with new loan: $1 per $1,000 of new loan amount. Minimum charge $250.
Beneficiary/assumption fee $100-$200 charge in connection with assumption of new loan.
TITLE COMPANY CHARGES
Recording fee $5 for first page plus $2 for each additional page. About $40.
ALTA lender’s policy Required by Lender. Rate schedule based on amount of new loan. Title companies are flexible on large commercial and industrial properties. Check with title representative.
Sub-escrow fee $75-$100 charge in connection with new loan.
LENDER’S CHARGE FOR LOAN ASSUMPTION STATEMENT AND TRANSFER FEES Fee charged by lender varies from $250 to percent of loan balance. Check with lender.
LENDER’S CHARGE FOR NEW LOAN
Loan fee 1 point is 1% of loan. Fees vary with lender.
Credit report $50-$100
Appraisal
$200-$750
Administrative fee $250-$400
Prepaid interest Collected from date of funding to one month prior to first payment date. Multiply loan amount by interest rate, divide by 360 for daily rate. Figure one month interest to be safe.
Miscellaneous fees Might include photos, inspections, trustee’s fees, etc. Check with lender.
TAX PRORATION Divide 1-year tax bill by 360 for daily rate. Tax year runs from July 1 to June 30. First half is due Nov. 1; second half is due Feb. 1. Figure amount which has been paid by seller or which will be paid by buyer and debit or credit appropriate party.
SUPPLEMENTAL TAX BILL Could be pending. Should be provided for in escrow instructions.
HOMEOWNER ASSOCIATION FEES Homeowner association documents, provided during escrow, will outline transfer fees, move-in fees and special assessments, if any.
MAINTENANCE FEE PRORATION Divide the monthly fee by 30 for daily rate. Debit buyer from close of escrow to end of month. (Seller has usually paid one month.)
FIRE INSURANCE Call agent for quote. In fire areas, California Fair Plan may take several weeks to obtain so start early; lenders will not fund until they have policy in hand.
PRELIMINARY CHANGE OF OWNERSHIP FORM $20 charge by L.A. County Recorder if form is not completed. Must be filed within 45 days after recording to avoid penalty.
MISCELLANEOUS FEES Allow $200-$400 in addition.
Note: Estimates are by nature approximate. In some cases, charges quoted are minimum.
SOURCE: Brentwood Escrow
SELLER’S ESTIMATED CLOSING COSTS
COMMISSION Percentage paid to brokers. Usually 6% of sale price.
ESCROW COMPANY CHARGES
Escrow fees Fees vary from company to company and with complexity of transaction. Base fee: $150-$300 plus $1.50 to $3 per $1,000 of total purchase price. May not include miscellaneous charges, i.e. drawing documents, amendments or messenger fees.
Beneficiary/demand fee $100 charge in connection with payoff of existing loan or assumption statement. Charge for each loan being paid off or assumed.
TITLE COMPANY CHARGES
Recording fees $5 for first page plus $2 for each additional page.
Monument fee About $10 for legal descriptions other than the usual lot and tract.
CLTA owner’s policy Most companie are competitive and fee schedules are based on purchase price. Be sure to check for “short-rate” savings for property owned less than two to five years.
Sub-escrow fees $75-$100 charged in connection with payoff of existing loan(s).
Document transfer tax $1.10 per $1,000 of purchase price for “new money,” which is purchase price less loans being assumed. Purchase money notes are considered “new-money.”
City transfer tax May apply in some areas.
LENDER’S CHARGE FOR STATEMENT OF EXISTING LOAN BEING ASSUMED Fee from lender for statement of loan balance: $50-$100. There may be other miscellaneous charges to seller.
CHARGES FOR PAYOFF ON EXISTING LOAN(S)
Reconveyence fee A fee will be charged for each loan being paid off: $75-$100.
Forwarding fee Most lenders charge $50-$100.
Prepayment penalty See copy of note or check with lender.
Impounds If taxes or insurance have been collected by lender, it may be a credit against loan pay-off.
Interest Interest is paid from date of last payment to date lender receives payoff funds.
TAX PRORATION Divide 1-year tax bill by 360 for daily rate. Tax year runs from July 1 to June 30. First half is due Nov. 1, second half is due Feb. 1. Figure amount which has been paid by seller or which will be paid by buyer and debit or credit appropriate party.
SUPPLEMENTAL TAX BILL Could be pending. Should be provided for in escrow instructions.
HOMEOWNER ASSOCIATION FEES
Transfer and move-out fees See CC&Rs; for applicable fees.
Maintenance fee proration Divide the monthly fee by 30 for daily rate. Credit seller from close of escrow to end of month. (Seller has usually paid ahead for the entire month.)
TERMITE INSPECTION Cost of inspection report: $50-$100. Work completed, if any, per quote.
MISCELLANEOUS FEES Allow between $200-$400 in addition.
SOURCE: Brentwood Escrow
