Who Pays Closing Costs - Buyer or Seller? (2024)

FAQs

Who Pays Closing Costs - Buyer or Seller? ›

In New Jersey, as in every other state, the buyer and seller both have their share of closing costs. Most of the buyer's costs are related to getting a mortgage, such as loan origination fees and the cost of a professional home appraisal.

There's no set number when it comes to closing costs. Typically, homebuyers pay around 2 percent to 5 percent of the home's sale price in closing fees, while sellers pay slightly more — between 6 percent and 10 percent of the home's price — when you factor in real estate agent commissions.

The main reason that buyers ask for closing costs is this: cash in hand. In the above example, if they are taking an FHA loan on the house, they are required to come up with a 3.5% down payment.

The buyer is usually responsible for most of the costs because mortgage fees usually are the largest. These fees include issuing the loan, fees to record the transfer of funds, and other costs like home appraiser and home inspection fees.

The purchase agreement form often specifies which party is responsible for paying certain closing costs. If not, the escrow agent will usually allocate the cost according to custom or general practice.

The homebuyer usually needs to cover several costs at closing — including one-time fees such as appraisal and home inspection fees, loan origination fees and taxes. In addition to these one-time expenses, buyers may also have ongoing costs such as property taxes, private mortgage insurance (or PMI) and HOA fees.

On average, sellers in California can expect to pay between 2 to 3% of their home's final sale price in closing costs. As a general rule, Escrow Charges are split 50/50 between the buyer and seller. There are exceptions, notably in San Francisco buyers are expected to cover Escrow fees.

But if you're feeling overwhelmed with all the expenses, there's a way to help reduce the cost at closing: Asking the seller to pay for your closing costs. Through seller concessions, the home becomes more affordable and you are given a little more breathing room.

Because closing costs can be high, negotiating a seller credit helps offset some or all of these costs. It's a valuable tactic, especially for first-time home buyers who want to buy now rather than wait to save enough money for closing costs.

Seller's credits can have a big impact on appraisals if they create an appraisal gap. Appraisers take these costs into account when valuing the home, so they can cause problems if they push the home's price up by too much.

How much are closing costs on a $500,000 house in California? ›

DOWN PAYMENT AND CLOSING COSTS

For a $500,000 home, this amounts to $17,500. Closing costs should also be taken into consideration. These include various fees and taxes and generally fall between 2% and 2.25% of the listing price. For a $500,000 home, closing costs could range from $10,000 to $11,250.

A debit refers to an amount of money that is owed or needs to be paid. In the context of a real estate closing, a debit is an expense or charge that either the buyer or the seller has to pay.

All buyers have to pay escrow fees. The escrow officer manages all funds in a real estate transaction, and ensures that all outstanding bills are paid. The escrow fee varies from company to company, but averages $450 base plus $2 per $1,000 purchase price.

On the day of closing, the Buyer is the owner of the property, and the Buyer is responsible for tax bills that come due on or after that date. All prorations are based on the Seller's current rate; the Buyer is then responsible for the increased amounts upon their ownership.