Closing costs are the expenses associated with buying or selling a home, excluding the cost of the home itself. For Buyers, I recommend budgeting about 3 % of the purchase price for closing costs, and for Sellers, about 7% of the sales price. Typical closing costs for the East Bay Area are explained below.
Who Pays What | More About Buyer Costs | More About Seller Costs
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Who Pays What
The Buyer customarily pays:
- Loan fees
- Title insurance policy premiums (lender’s and buyer’s)
- Escrow fee
- Notary fee
- Annual property tax proration (from date of purchase onward)
- Homeowner’s association transfer fee, if required
- Home Warranty plan
- One-half of City transfer tax
- Fire (hazard) insurance premium for the first year
- Pro-rated interest on new home loan
The Seller customarily pays:
- Real estate commission
- Documentary (county) transfer tax
- Annual property tax proration (up to date of purchase)
- One half of City transfer tax
- Any outstanding liens or loans secured by the property (such as a mortgage)
For Buyers
Loan Fees
Points
Points are one-time-only fees you may elect to pay to a lender up front in exchange for a lower rate on your mortgage. One point is one percent of the amount of your new loan. Depending on your particular situation, you may choose anything from a zero point loan to a two point loan. The points on your new loan, if any, are due at close of escrow.
Appraisal
The cost of the appraisal is sometimes charged to you by your lender at the beginning of escrow, when the appraisal is ordered. However, if you have not paid it in advance, it will be due at close of escrow. A typical appraisal fee is $300 – $500, depending on the property.
Credit Report
Usually in the range of $25 – $70, depending on number of borrowers.
Processing fee
Sometimes called an underwriting fee. Depending on the loan you choose, this fee may be anywhere from $400 – $800.
Pre-paid interest
Usually, the lender will charge you interest only (as opposed to principal plus interest) on your new loan, pro-rated from the close of escrow through the end of that month, due upon close of escrow.
Escrow Fee
People often erroneously use the term “escrow fees” when they mean “closing costs.” In fact, there is only one escrow fee, which is one of your many different closing costs. The escrow fee is the fee charged by the escrow company to handle your escrow. It is calculated based on the price of the home, and typically is in the range of $900.
Title Insurance
Your lender will require you to obtain title insurance, which protects your ownership (title) of the property against other, previously recorded liens. There is one policy which protects you, and a second policy that protects the lender, but guess what? The lender makes you pay for them both. A typical owner’s policy costs $1700 – $3600, while a typical lender’s policy costs $600 – $1100.
Miscellaneous Charges
The title company will charge several small, itemized fees to cover things like document preparation, courier, wire transfer, notary, and recording. All of these fees combined generally total around $350 – $500.
Transfer Tax
At transfer of title (close of escrow), depending on location, there may be a one-time only transfer tax charged by the city and county. It is customary for the seller to pay the county tax, and for the seller and buyer to split equally the city tax (if any).
| Alameda/Contra Costa County Tax | $1.10 per $1,000 of sales price |
| Piedmont city tax | 1.3% of sales price |
| Oakland city tax | 1.0% to 2.5% of sales price |
| Berkeley city tax | 1.5% to 2.5% of sales price |
| Albany city tax | 1.15% of sales price |
| Kensington city tax | No city transfer tax |
| El Cerrito city tax | 1.2% of sales price |
Pro-rated Annual Property Tax
Annual property taxes are a pro-rated closing cost. If the seller has already paid the tax installment, you will credit them for that period of your ownership which has been prepaid. If the installment is due, but not yet paid, the seller will credit you for the period up to the close of escrow, and you will pay the installment.
Hazard (Fire) Insurance
Sometimes called fire insurance, the lender requires that you pay an entire year’s premium up front. Typical annual hazard insurance premiums are in the range of $800 – $2,500.
Example of a Typical Buyer’s Settlement Sheet
| Purchase price | 1,500,000 |
| Initial deposit (3% of purchase price) | 45,000 |
| New loan | 1,000,000 |
| Lender charges | |
| Points (0.25 x 1,000,000) | 2,500 |
| Processing | 750 |
| Appraisal | 500 |
| Credit Report | 50 |
| Interest on loan: 15 days at 4.25% | 1,771 |
| Subtotal | 5,571 |
| Escrow charges | |
| Fire Hazard Insurance | 1,200 |
| Prorated annual property taxes | 615 |
| Escrow fee | 1,800 |
| Title insurance (owner’s policy) | 3,000 |
| Title insurance (lender’s policy) | 1,000 |
| Recording, document prep, courier, notary etc. | 400 |
| City Transfer Tax (one-half of total tax) | 11,250 |
| Subtotal | 19,265 |
| Remainder of down payment ($500,000 minus $45,000 deposit) |
455,000 |
| Total due on closing (purchase price, minus deposits, + closing costs) |
1,024,836 |
For Sellers
Sellers have far fewer closing costs than buyers, but the costs they do have are the biggies: mortgage and commission. The escrow officer receives funds from the buyer and buyer’s lender, including down payment and new mortgage, and uses these funds to pay off your mortgage, other outstanding liens such as property taxes, and any other costs of sale.
Mortgage Pay-Off
After escrow is opened, the escrow officer will contact your lender to get a current figure for the amount outstanding on your home loan(s), pro-rated as of the close of escrow. The entire amount must be paid off before title may transfer out of your name.
Real Estate Fee (Commission)
This commission (generally 6% of the sales price) is split equally between the listing brokerage (representing you, the seller) and the brokerage representing the buyer. Within each brokerage, it is split between the company (or office) and the agent. The agent then pays her own taxes, overhead, assistant, etc. So when you pay that big fee, you are actually paying a whole chain of people involved in the sale of your home, not just your own agent.
Prorated Annual Property Tax
If your annual tax bill is due but not yet paid, you will be charged (pro-rated) through escrow.
Transfer Tax
At transfer of title (close of escrow), depending on location, there may be a one-time only transfer tax charged by the city and county. It is customary for the seller to pay the county tax, and for the seller and buyer to split equally the city tax (if any).
| Alameda/Contra Costa County tax | $1.10 per $1,000 of sales pric. |
| Piedmont city tax | 1.3% of sales price |
| Oakland city tax | 1.5% of sales price |
| Berkeley city tax | 1.5% of sales price |
| Albany city tax | 1.15% of sales price |
| Kensington city tax | No city transfer tax |
| El Cerrito city tax | No city transfer tax |
Miscellaneous Closing Costs
The title company will charge several small, itemized fees to cover things like document preparation, courier, wire transfer, notary, and recording. All of these fees combined generally total around $350 – $500.
Overall, I recommend you assume about 7% of the sales price will be diverted to closing costs. When an offer is accepted on your property and I open an escrow, I will prepare a detailed list of your own closing costs, based on information provided by you and the title company. Below is a sample summary of seller’s costs:
Example of a Typical Seller’s Settlement Sheet
| Sales price | 1,500,000 |
| Real Estate Commission (6%) | 90,000 |
| Pay off existing loans | 525,000 |
| Prorated annual property taxes | 1,257 |
| Processing, courier, recording, etc. | 300 |
| County Transfer Tax | 1,650 |
| City Transfer Tax (one-half of total tax) | 11,250 |
| Subtotal | 629,457 |
| Estimated total due to Seller at closing | 870,543 |
Hello, I’m Holly Rose. I help people buy and sell homes in the East Bay. I specialize in fine old homes with interesting or historically significant architecture.