Closing Costs

Closing costs are the costs associated with buying or selling a home that are paid through escrow, excluding the cost of the home itself. Typical closing costs are explained below.

Who Pays What  |  More About Buyer Costs  |  More About Seller Costs

Who Pays What

Buyer customarily pays:

  • Title insurance policy premiums (lender’s and buyer’s)
  • Escrow fee*
  • Notary fees*
  • Property tax proration (from acquisition date)
  • Special delivery/courier fees, if required
  • Document preparation fees*
  • Document recording charges*
  • Homeowner’s association transfer fee and prorata dues (varies)
  • One half of city transfer tax, if any**
  • Home Warranty according to contract
  • Inspection fees according to contract (termite, roof, property, geological, etc.)
  • Matters of record against the buyer (tax liens, judgments, etc.) and fees required to clear them
  • Fire insurance premium for the first year
  • Assumption/change of records fee for takeover of existing loan
  • Lender’s new loan charges*
  • Interest on new loan from date of funding to 30 days prior to first payment
  • Other prorations (rents, insurance, etc.) if applicable

 

The Seller can generally be expected to pay:

  • Real estate commission
  • Documentary (county) transfer tax
  • Notary fees
  • Property tax proration (to date of acquisition)
  • Special delivery/courier fees, if required
  • Document preparation fees
  • Document recording charges
  • Homeowner’s association statement fee and prorata dues (varies)
  • One half of city transfer tax, if any**
  • Home Warranty according to contract
  • Work/repairs required according to contract
  • Matters of record against the property or seller (loans, tax liens, judgments, etc.) and fees required to clear them (statement fees, reconveyance/trustee fees and prepayment penalties
  • Bonds and assessments according to contract

* On certain Government loans, these charges may be specified as seller’s charges or may not apply.
** Additional costs may be unique to your city.

 

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 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 TITLE 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 (translation: 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 and Contra Costa Counties: $1.10 per $1,000 of sales price.
Piedmont: 1.3% of sales price.
Oakland: 1.5% of sales price.
Berkeley: 1.5% of sales price.
Albany: 1.15% of sales price.
Kensington: No city transfer tax.
El Cerrito: No city transfer tax.

PRO-RATED 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 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.

All told, I recommend budgeting about 3% of the purchase price for closing costs. When your offer is accepted and escrow is opened, I will put together a detailed list of your own closing costs, based on figures supplied to me by your lender and title company. Below is a sample summary of buyer’s costs:

Estimated Closing Costs: 1234 Shady Lane, Berkeley

Purchase price 750,000
Initial deposit (3% of purchase price) 22,500
Increased deposit 0
New loan: (80%) 600,000
Lender charges:
Points (1) 6,000
Processing 750
Appraisal 500
Credit Report 50
Interest on loan: 15 days at 6.25% 1,563
Subtotal 8,863
Escrow charges:
Fire Hazard Insurance 1,200
Prorated taxes: 47 days 615
Escrow fee 930
Title insurance (owner) 2280
Title insurance (lender) 657
Recording, document prep, courier, notary etc. 400
City of Berkeley transfer tax 5,625
Subtotal
Remainder of down payment
($750,000 minus loan and deposit)
Total due on closing

 

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

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 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.

PROPERTY TAXES

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 (translation: 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 and Contra Costa Counties: $1.10 per $1,000 of sales price.
Piedmont: 1.3% of sales price.
Oakland: 1.5% of sales price.
Berkeley: 1.5% of sales price.
Albany: 1.15% of sales price.
Kensington: No city transfer tax.
El Cerrito: No city transfer tax.

MISCELLANEOUS TITLE 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.

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:

Estimated Closing Costs: 1234 Shady Lane, Berkeley

Purchase price 750,000
Real Estate Commission 45,000
Pay off existing loans 525,000
Prorated taxes 1257
Processing, courier, recording, etc. 300
County Transfer Tax 825
City Transfer Tax 5,625
Subtotal 578,007
Estimated total due to Seller at closing 171,993

 

Ways of Holding Title