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closing_costExcerpted from an article by Benny L. Kass for realtytimes.com

“…..When a seller signs a listing agreement with a Real Estate Broker, authorizing that person to sell the house, in addition to all the other forms which sellers receive (lender points, title insurance, settlement fees…), the seller should be given an estimated settlement statement.  This statement will project the bottom line to the seller, based on the listing price.  When an offer is later presented to the seller, the settlement statement should be updated to reflect the actual terms of the proposed contract…

….The following charges are generally made to the seller:

  • Real estate commission:  Seller should be informed of the $$ amount to be paid out of settlement for the commission.
  • Mortgage payoff:  Most sellers have at least one mortgage outstanding on the property.  Your lender will be able to give you an approximate payoff figure, if you given them a tentative settlement date.  Don’t forget to add a daily interest charge until the lender receives the full mortgage payout.  Also inquire whether there will be any prepayment penalty…some older loans still require the borrower (in this case the seller) to pay a percentage of the lo0an it if is paid if in full prior to the full expiration of the mortgage term.  In some instances the prepayment penalty can be avoided or waived by the lender, and you should inquire about that.
  • Points:  Perhaps one of the least understood areas of real estate financing.  Sellers often question why they have to pay points to enable the buyer to get their loan.  A  point is equal to one percent of the loan.  FHA or VA loans put limitations on the amount which the buyer can pay for closing costs.  Many buyers who will be obtaining conventional financing also want the seller to pick up some of these settlement charges – including points paid to the lender.  Seller paid points are still deductible for tax purposes by the buyer.  Thus, while sellers want to get the most dollars from their house, there are often negotiation advantages if a seller offers to split points with the buyer.  Such an arrangement may be the clue to closing the deal.
  • Termites:  Most buyers require a termite inspection, at the seller’s expense.  Sometimes the seller is hit with a sizeable repair bill due to termite damage.  If the seller has a current contract with a termite company, that company should be willing to give the required letter for no cost or a nominal charge.  Finally, when you make arrangements for the termite inspection, make sure they understand they will not do any repair work without informing you in advance.  Since the seller is paying for these charges, the seller should have the option to shop around for the best price
  • Release charges:  When seller obtained mortgage financing, it usually was in the form of a deed of trust.  This is similar to a mortgage, but the property is deeded “in trust” to independent trustees who are authorized to sell the property if a default occurs.  When the mortgage is paid in full the trustees are entitled to a nominal “trustee’s fee” and there is a small governmental charge to record the trustee’s release.  These items are always withheld at settlement and deducted from the seller’s funds.
  • Other governmental charges:  Many jurisdictions impose a tax on the transfer of real estate. (Grantor’s Tax or Recordation and Transfer Tax) Unless your state law mandates who is to pay this fee, it is negotiable and should be on the bargaining table when seller and buyer are hammering out terms of the purchase and sale.
  • Settlement charge:  Some settlement offices iwll impose a nomiunal charge onthe seller for “settlement services.”  Many sellers are often surprised when they learn, for the first time at the settlement, that they will not be getting as much from the sale of the house as they had anticipated.
  • Don’t forget to:  1.  Cancel your home insurance policy as soon as you get the sales proceeds, and 2.  if you are making automatic mortgage payments, cancel that also.”

SOURCE:  realtytimes.com – Benny L. Kass

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