August 25th, 2023 at 11:00 am

Understanding California closing costs in real estate

Buying a house is a major purchase. In fact, for most people, it will be either the largest or one of the largest purchases of their lives. It can be easy to become fixated on that big number that you’ll be paying down for many years to come. However, even that big number doesn’t tell the whole story.

For one thing, it doesn’t include the seller closing costs and buyer closing costs.

What are closing costs in California?

Closing costs in real estate can be a confusing topic for the average home buyer because many different fees can be considered home sale closing costs. To demystify seller closing costs and buyer closing costs, let’s go over some of the fees you can expect to pay and touch on how much money you should be ready to spend on closing costs.

Closing costs real estate price

Before going into all of the individual closing costs you may encounter as a home buyer, let’s take a moment to look at the big picture. When it comes to average closing costs there’s no specific number you should be targeting as a few factors play into how much you’ll likely have to pay for your closing fee:

These are some big numbers to be dealing with and can lead to a sense of sticker shock if you’re not prepared. The price of closing costs may be able to be added to the total of your home loan or may be paid in cash, but either way, the closing fee price is something you need to factor in when determining your budget. We also suggest consulting your real estate agent when dealing with closing costs. When hiring a real estate agent, it is important to understand the difference between a listing agent vs selling agent.

Logistics of closing costs

Now that you have a broad idea of how much closing costs may be, you may still have some questions about how they get paid. Let’s address a couple of common questions.

Who pays closing costs?

Your first question in regards to closing costs may very well be who is responsible for paying them. Do these costs affect buyers or sellers? The answer is both.

While many of the total closing costs will fall on the buyers of a new home, there are also real estate closing costs that the seller will have to pay. Also, who pays certain closing fees may vary based on where you purchase your home.

When do you learn what your costs are?

You will not officially know what your real estate closing costs are until three days before you close on the home. The official closing fees will be contained in a document called your closing disclosure.

While this is when you’ll receive your final costs, you will be able to get a sense of what your costs will be much earlier. When you fill out a loan application, your lenders have three days to provide you with a loan estimate document. This document will have an estimation of your buyers closing costs and sellers closing costs included.

Categories of closing costs

Not all closing costs are the same. Some are fees. Some are taxes. Some are just costs associated with buying the house. As such, you may be able to lower or even fully avoid certain closing costs, while others will have to be paid. The categories mortgage closing costs tend to fall into include:

Typical closing costs

Hopefully, you’re getting a better sense of what you may be in store for when it comes to mortgage closing costs. To prepare you further, it’s worth going into some of the specific costs that are typically associated with a home sale. Each sale is different, so having a professional to help you go over your costs can ensure you’re not paying more than you have to.

At Berkshire Hathaway HomeServices California Properties, we’re experts in all things real estate. We’ll go over your costs with you and provide you with options to help you deal with everything around closing.

Buyer fees

Let’s start by looking at some of the costs likely to be taken on by the buyer of a new home:

Shared fees

These fees could be covered by the buyer, the seller, or both depending on the situation:

Seller fees

Finally, let’s look at a couple of costs the seller may be responsible for:

Strategies for effective management and negotiation of closing costs

Effectively navigating closing costs calls for a combination of practicality and negotiation skills. Implement the following strategies to help manage these expenses:

Comparing closing costs across property types

Closing costs vary based on both property specifics and property types, such as condominiums compared to single-family homes:

The role of realtors and loan officers

Expertise is a cornerstone when it comes to navigating the landscape of closing costs:

The significance of loan estimate (LE) and closing disclosure (CD)

Two pivotal documents, the Loan Estimate (LE) and Closing Disclosure (CD), play a critical role in comprehending closing costs:

Understanding the process with California Properties

Closing costs can seem complicated and if you aren’t familiar with them, it can be overwhelming, especially when added to all the other considerations of buying a house. The agents at California Properties are here to help. Our expertise allows us to clarify all closing costs for you and make sure you are only paying what you need to and don’t get taken advantage of. If you’re also wondering, “what is fixed rate mortgage,” or what the difference is between under contract vs pending contract, we’ve got you covered!

Make your real estate transaction as straightforward as possible with California Properties.

Sources: US News, US News, US News, LA Times, LA Times, SF Gate

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