As the real estate market has heated up in many areas of the country to swift and unprecedented rates of turnover, and buyers and sellers float around on pink clouds of points and title transfers, a deadly villain lurking in the fine print is bringing down many a deal. "Closing costs," that vague catchall sum, are getting lost in the paperwork shuffle, and both buyers and sellers are sometimes left on deal day without sufficient funds to close the sale.
Banks are so eager to bring in borrowers that they're offering incentive packages that combine aspects of no points, low interest, and waived private mortgage insurance, to name just a few. And all of them can potentially affect final costs.
The current climate is very different from the traditional buying most of us have engaged in all our lives. The price of the house is not the same as the price of the transaction. And the estimated 2 to 5 percent price increase to the selling price that closing costs add often catches people unprepared.
Closing costs are something that people have heard about but rarely thought about definitively. And, because of the variety of package deals currently on the market as well as the fact that they vary among jurisdictions, they're something even real estate agents can have trouble predicting.
If you're considering buying or selling a property, familiarize yourself with the following terms and expect to pay for:
- Appraisal
- Credit report
- Document preparation
- Escrow
- Homeowner's insurance
- Inspections and clearance
- Points (sometimes called origination fee)
- Prorated property tax (also condo or housing association fees)
- Real estate brokers' commissions
- Title examination, transfer, and insurance
- Transfer tax
If you have questions concerning a real estate matter, please contact your attorney.
(Based on "Deciphering the True Cost of Closing a Deal," Cleveland Plain Dealer, August 15, 1999)