A Closer Look at Closing Costs
The term Closing Costs refers to the fees required to legally transfer ownership of a property and finalize a real estate transaction. Here is a breakdown of the closing costs for each side of the deal.
- For Buyers:Loan-Related: Loan Origination, Home Appraisal, Application/Underwriting fees, and optional Discount Points.
- Property/Legal: Title Search/Insurance, Attorney Fees, Recording Fees, Transfer Taxes, and Owner’s Title Insurance.
- Prepaid/Escrow: Property Taxes, first year's Homeowners Insurance premium, and Prepaid Interest (from closing to month-end).
- Transaction Costs: Real Estate Agent Commissions (often paid by seller), Utility Proration (Fuel, Water & Sewer).
For Sellers:
- Transaction Costs: Real Estate Agent Commissions and Attorney Fees.
- Other Expenses: Prorated Property Taxes, outstanding Utilities/HOA Dues, and negotiated Buyer Credits/Repairs. If the sellers are not Vermont residents, they may be subject to a 2.5% non-resident withholding tax. Foreign citizens are subject to an additional 15% federal withholding tax.
Allocation: Cost allocation is negotiable and dependent on local custom. Some sellers may agree to cover a portion of buyer costs, known as a concession.
Transparency: When a loan is involved, the lender is required to send the Closing Disclosure, which details all fees and charges, at least three business days before closing.
