Who Pays What
Understanding the allocation of costs in a real estate transaction is paramount in the process for both buyers and sellers. Closing costs can make or break a transaction by significantly impacting financial considerations. Whether you’re a seasoned investor or a first-time home buyer, understanding the details on who pays what at the end of the day will empower you to have more confidence at the closing table.
Closing Costs: Sellers
Prorated Property Taxes &/or HOA Fees
Property taxes in North Carolina are paid in arrears meaning the taxes for a property are prorated based upon the cumulative number of days the seller owned the home throughout the year. Therefore, if a seller closes in December they are more likely to pay more taxes than if you closed on the property in February. HOA fees are also paid until the day of closing. The title company will verify that the seller is in good standing with the HOA, and that all current dues are paid before providing a clear title on the home.
Excise Tax (Revenue Stamps)
In North Carolina, an excise tax commonly referred to as “revenue stamps” is levied on each real estate transaction. This tax is equivalent to $1 for every $500 in sale price.
Wire Fees
In order for a previously existing mortgage to be paid off, the seller will need to send the minimal cost required by the lender through wire transfer.
Seller Concessions
During the negotiation process of the sale, a seller may agree to cover closing costs associated in the transaction, including those of the buyer, in part or in full. Other seller concessions may include covering the costs of essential home repairs.
Closing Costs: Buyers
Origination Fees
To originate a loan, lenders charge an origination fee. In North Carolina, this loan origination fee is currently capped at 0.25%. For example, after putting 20% down on a $350,000-home will give you a loan amount of $280,000. The loan origination fee associated with this loan would be approximately $700.
Mortgage Points
Interest rates have increased significantly in the past year. It is highly common for buyers to pay money head of the home purchase in order to lower the amount of points on their mortgage. Mortgage points can save you money over a long period of time but cost you around 1% of your loan amount per point.
Title-Related Fees
Attorneys perform title searches to verity that no existing liens or encumbrances exist on the title of the home. A title insurance policy defends the buyer and lender aginst any faults with the title. Typically there is a fee involved with this property record search.
Insurance Premiums
Mortgage lenders may require you to place funds in an escrow account in order to cover multiple months of homeowners insurance premiums related to certain policies.
Property Tax
Similar to insurance premiums, lenders may require additional funds in escrow to cover any property taxes issued by the local municipalities.
Appraisal & Inspection Costs
Appraisals are usually required by lenders in order to verify the value of a requested loan. In addition, buyers typically want a home inspection performed to ensure that no major damage or problems exist that could affect the purchase price or value.
Recording Fees
During the closing process, the buyer will sign a new deed for the property they are buying. This new deed must then be recorded in the county courthouse with the Register of Deeds for that county. Typically, the county courthouse will charge a nominal fee in order for the recording to take place. Buyers can usually find an estimate of this cost, as it is a standard cost of the courthouse, on the county and/or court website.
Keep In Mind
Typically, the selling party of a real estate transaction is responsible for paying any real estate agent fees of the transaction. However, this commission, and how it is paid to agents at closing, is agreed to by the seller and listing agent at the time of listing. Commissions are negotiable and buyers should be aware of how they are being paid.
Understanding the distribution of closing costs in North Carolina is necessary for both buyers and sellers. While certain costs are traditionally allocated to one party or the other, negotiations and local market conditions can influence the final arrangement. It is essential for all parties to communicate openly and to seek professional advice for a smooth transaction.
Remember, specific situations may warrant various payment arrangements so consulting with a professional real estate expert like one of the REALTORS® at Margaret Rudd & Associates, Inc., REALTORS® will benefit buyers and sellers. By offering unparalleled guidance and superior service, our REALTORS® will empower you to have more confidence at the table and will help direct you to a successful closing.
*Please note that the information provided within this article is subject to change due to specific negotiations and circumstances. Please also note that this list is a basic list and other closing costs may exist in your transaction. For information on closing costs involved in the purchase or sale of your property, please consult with your professional real estate agent.
Posted by Margaret Rudd & Associates, Inc., REALTORS® on
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