Who pays closing costs?

5 Replies

Hi guys,

We have a seller who's interested in putting their property under contract with us. They have an issue with paying costs at closing, however.

Our contract states that they pay the costs of preparation and transfer of the Deed, and that we pay all other closing costs. It then separately states that the seller is responsible for getting Title Insurance and maintaining insurance over the property against loss or damage up to closing. These costs for insurance would be paid by the seller.

We'd like to clarify the following:

  • Is it normal for the seller to pay their costs of preparation & transfer of the deed?
  • What sorts of things would the "other closing costs" encompass"? I.e. what would a wholesaler normally be paying at closing?
  • Is it normal practice for the seller to obtain (at their own expense) Title and Property Insurance, or is this something we should be reimbursing them for as well?
  • OR is the end buyer usually required to pay ALL these costs (or is it reasonable to request this from them)?

Thanks for any clarification on this matter.

    @Steve G. which side pays what is generally a matter of local convention. The real question is, don't you want the property?  Why are you bickering over a few hundred dollars?  Many wholesalers will pay all the sellers closing costs. 

    Generally, closing costs involve these:

    1. loan origination fee (a compensation to the lender, around 1% of loan),
    2. loan application fee
    3. attorney's fee,
    4. lender's attorney's fee,
    5. credit check costs,
    6. PMI mortgage insurance
    7. title search & title insurance for lender
    8. and title insurance for yourself.


    Seller

    1. prelim Title report ::
    2. hazards report ::
    3. Agent Commissions ::
    4. Existing Loan Payoff ::
    5. transfer tax/recording ::
    6. owners title insurance :: 2,400 (0.35 * sales price)
    7. attny fees ::
    8. liens / judgments ::
    9. hoa fees ::
    10. prorated property taxes :: t
    11. termite inspection ::
    12. repairs (demand by buyer) ::


    Buyer

    1. Appraisal fee
    2. Origination fee
    3. Pre-paid interest
    4. Pre-paid insurance
    5. Flood certification fee
    6. Tax servicing fee
    7. Credit report fee
    8. Bank processing fee
    9. Recording fee
    10. Notary fee
    11. Title insurance

    @Larry T. - thanks for the reply, no bickering - just aiming for clarification!

    NA Beard - Many thanks for taking the time to put that detailed info together. I'll go through it and add to this post if I have further questions.

    Thanks.

    In Florida, the seller typically pays for deed transfer doc. stamps (0.7%), title insurance (0.55%), a settlement fee of $300-400, and a few hundred in deed recording, title search, city lien search, etc.  Of course, these are just customary and are negotiable.  You can't really require the seller to buy property insurance, he simply needs to deliver the property in the same condition as when the contract was executed.

    @Wayne Brooks - thanks for your additional information.

    So can I confirm that the costs you mention would "usually" apply outside of the "Closing Costs" most wholesalers specify when they market for properties?

    ie" "We pay all closing costs"

    I'd like to understand if the costs relating to Title Insurance, preparation & transfer of the deed, searches etc. are "usually" paid by the seller, the wholesaler or the buyer ?

    Thanks