Closing costs are the costs of legal paperwork associated with the purchase or sale of a property. The title company in charge of the transaction is the one that handles all the expenses and procedures that imply the closing processes that the buyer and the seller incur when buying a property.
How are closing costs calculated?
If the transaction is in cash, the closing costs are approximately between 1.5% to 3% of the value of the purchase and if it is financed it can vary between 4% and 5%, this will depend on the cost of the bank when generating the mortgage. When buying directly from the developer, closing costs can be 6% to 8% of the purchase value.
Closing costs include:
Loan Application Fee: Most banks or financial institutions charge an initiation fee. The lender may also charge you discount points to lower your interest rate to improve the terms of the mortgage loan.
Property Appraisal Fee: This report is ordered by the lender or bank to ascertain the condition of the property and verify that the purchase price is in line with the most recent sales of similar properties in the same area.
Lender Fees: These fees are prepaid mortgage interest in advance for the month you will live, usually required to be 12 months in advance.
Reserve deposits: The bank usually requires the buyer to deposit in an account managed and administered by the same financial institution granting the mortgage. These reservation deposits apply to property insurance, local property taxes.
Fee for surveying, surveying or reconnaissance: When a single-family home is purchased as a house with land, the borrower or bank requires a survey report to ensure that there are no violations or illegal acquisition by a neighbor of portions of the property’s land. or defects related to the title of the property.
Title insurance: It is used in all transactions and basically the history of the transfers of a property is studied to verify that they have been done correctly.
Cost of the attorney or title company: The buyer has every right to hire a real estate attorney or title company to defend his interests at the time of the transfer of the property or during the purchase process.
Property registration costs: Deed of sale and mortgage registration, in Florida the documentary stamp tax and the intangible tax. These are the taxes that the state of Florida charges for the privilege of borrowing money and these expenses are paid by the buyer. Stamp duty is usually paid by the property owner at closing time.
Inspection of the property: It is recommended that the buyer carry out an inspection of the property, which includes an inspection of termites or destructive organisms, inspection of the roof, electricity, plumbing, etc.
Commission of sale or the real estate agent: The real estate or real estate agents involved in the transaction, are usually compensated by the seller of the property. Generally, you should pay a 6% to 10% commission per sale, based on the sale price. In some exclusive representation circumstances, the real estate agent also charges the buyer a representation fee, which may be based on a percentage or a fixed cost, which is agreed between the buyer and their real estate agent in advance.
