Closing Costs
Seller's Closing Costs
If the seller has not yet paid for the house in full, the seller's most important closing cost is satisfying the remaining balance of their loan. Before the date of closing, the escrow officer will contact the seller's lender to verify the amount needed to close out the loan. Then, along with any other fees, the original loan will be paid for at the closing before the seller receives any proceeds from the sale. Other seller closing costs can include: Broker's commission Transfer taxes Documentary Stamps on the Deed Title insurance Property taxes (prorated)
Prorations
At the closing, certain costs are often prorated (or distributed) between buyer and seller. The most common prorations are for property taxes. This is because property taxes are typically paid at the end of the year for which they were assessed. Thus, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won't come due until the following year! To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for half the taxes at closing.
What Are Closing Costs?
The various fees associated with the buying or selling of a home are called closing costs, e.g., lender fees incurred by the buyer, or broker's fees incurred by the seller. Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiable or dictated by local custom.
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