Here’s what both homebuyers and sellers need to know about closing costs.
What are closing costs? Who pays for them?
I hear questions like these all the time, and the answers depend on whether you’re a buyer or a seller.
For buyers, if you don’t have cash and do have a mortgage, you will have some closing costs. The majority of the cost is related to your loan, but there are also some prepaid taxes included. In the state of Oregon, the buyer and seller work with a title and escrow company and split the costs between them.
For example, let’s say you’re buying a home for between $350,000 and $400,000. The closing costs could be anywhere from $5,000 to $9,000 depending on your loan type and the tax base for that property.
Sellers, on the other hand, often receive requests from buyers that they pay the closing costs for them. Most of my sellers, frankly, get up in arms about this—why should they pay for the buyer’s closing costs on top of their own? The truth is that you don’t owe it to the buyer to pay their closing costs. The buyer is simply saying that they’d like to finance their closing costs.
If your home is for sale for, say, $500,000 and the buyer’s offer came in for $500,00, but they asked for $7,000 in closing costs, you might think, “Great! I got my $500,000, but I don’t really want to pay for the buyer’s closing costs.” In reality, the buyer is offering you $493,000; they want to save that $7,000 by not tacking onto their loan. You’d just need to take your emotions out of play and decide if an offer of $493,000 is acceptable to you.
The truth of the matter is that it’s important for you to work with your lender to understand your closing costs. And as a seller, I encourage you to work with an agent (like myself) who can demystify and break down every offer by each one’s individual strengths. That way, you can understand what your net profit will be after all the fees are paid.
If you have any questions about closing costs or anything else to do with real estate, reach out to us. We’re here to help.