Estimating closing and sales costs accurately?

6 Replies

Your realtor should be able to provide nearly exact numbers.

Origination and other fees from the lender - You can ask them.

Fee from title company -  you can ask them.

Fee from your agent - you can ask them.

Insurance - Ask the insurance agent

Property taxes - look it up on your country appraisers site.

Appraisal fee - Ask your bank, they usually have a good idea.

I think that includes most everything.  Hope this helps.

Originally posted by @Greg Stetz :

Whats a great way to find out sales and closing costs before you buy a property? I have calcs to use but how do I get tighter numbers?

 Your local lender will have all the details. Me telling you about the Oakland's transfer tax does you no good.

There will also be things negotiated in the contract that have hyper-regional norms, a local lender will be able to say "there's such-and-such closing cost, typically this is split 50/50" or "typically the buyer pays this fee entirely," and so on.

@Greg Stetz

The lender you’re using can give you the information you’re looking for regarding their fees and what you’ll need to bring to the table. As mentioned above, you can contact your title agency, etc for their respective fees. Feel free to message me if you’re looking for more Florida specific information.

Keep in mind that while humans have been buying and selling real estate for thousands of years and so the process should be the most streamlined in existence, it isn't.  It is endlessly frustrating to not get exact numbers until the day of closing.  My pet peeve aside, you can generally get 90% of the way there fairly early on in the process. 

Here are my closing costs for a REO purchase in Chicago suburbs.

$187,900.00 Home

$892.00 Origination

$340.00 Appraisal

$10.00 Credit report

$11.00 Flood cert

$120.61 Daily interest

$903.00 Homeowners insurance

$2,595.61 Escrow

$1,850.00 Title services

$1,100.00 Title insurance

$450.00 Attorney

$89.50 Recording charge

$8,361.72 Total

I see everyone using $2500-3,500 closing costs in all these tutorials and podcasts, I cant seem to make cash flow, 1% rule, 2% rule or ROI numbers work for buy and hold investing in my area.

Putting in offers and homes are selling at or above list in a few days.

Are these numbers much higher than other states? 

Originally posted by @Joe Carlson :

Here are my closing costs for a REO purchase in Chicago suburbs.

$187,900.00 Home

$892.00 Origination

$340.00 Appraisal

$10.00 Credit report

$11.00 Flood cert

$120.61 Daily interest

$903.00 Homeowners insurance

$2,595.61 Escrow

$1,850.00 Title services

$1,100.00 Title insurance

$450.00 Attorney

$89.50 Recording charge

$8,361.72 Total

I see everyone using $2500-3,500 closing costs in all these tutorials and podcasts, I cant seem to make cash flow, 1% rule, 2% rule or ROI numbers work for buy and hold investing in my area.

Putting in offers and homes are selling at or above list in a few days.

Are these numbers much higher than other states? 

Your numbers seem high for the price of the home as your costs are about where my last purchase was (going from memory) but my last purchase was $442K.

The rest of your observations seem to be accurate for San Diego. Most purchases are at a cost that makes them have negative cash flow. I suspect many inexperienced investors, that do not understand the full cost of buy n hold, are under calculating long-term costs and may not even realize that they are purchasing a cash flow negative house. 1% properties have not been found on MLS here since maybe 2013. 50% rule would show every purchase at large negative cash flow (but at our rent point the 50% rule is too conservative).

I look for value adds that reduce my investment amount and provide instant sweat equity.  I have yet to purchase a RE that projected at purchase as cash flow negative (I have purchased some that had very little (virtually neutral) cash flow projections) but if I want to make a purchase in this RE environment it may be required to purchase cash flow negative.  If I can produce an instant $20K to $50K sweat equity via the value add I can sustain many months of negative cash flow and still have a decent investment.  Hopefully, before the negative cash flow has consumed the sweat equity, the rents have risen to where I now have a cash flow positive RE.

It is a lot more challenging to find good RE investments in my market than it was a few years ago and 5 years ago they were everywhere.

Good luck

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