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What are "Closing Costs"?
Closing costs are the expenses over and above the property's price that buyers and sellers usually incur to complete a real estate transaction. Those costs may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees, real estate commissions and credit report charges...among other things.
As every transaction is unique, every buyer's and seller's closing costs are different. However, the idea of closing costs being unpredictable is not so. There is a way to calculate ahead of time what additional costs each buyer and seller will have to pay at closing.
If you are purchasing a home, your lender will work very closely with you to give you an estimate of what your closing costs will be and how much money you will need to bring to the closing table. Many of a buyer's closing costs are associated with the cost of their loan. Lenders are required by law to disclose this information ahead of time and you will need to sign off on that document confirming you have seen it.
If you are selling a home, you definitely want to know how much you will NET after closing. Your real estate agent can work with the title company to prepare a Seller's Net Sheet to give you a pretty close estimate of what you will net after closing costs and the pay-off of any existing mortgages.
Finally, prior to closing, both Buyers and Sellers will receive a copy of the Settlement Statement to review to make sure it looks correct. This is also another chance to ask questions. There are a lot of people involved in assisting with your transaction and they are all human. Mistakes happen. It's so much easier to catch a mistake and fix it prior to the closing than afterwards, so ask if you are unsure about something.
It is expensive to both buy and sell a home, but there should be no surprises. Make sure you are communicating closely with your lender and/or real estate professional to stay well-informed and your transaction will run smoothly!
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