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Selling a property is a complex legal transaction, one that includes many moving parts and multiple professionals to handle the details. To ensure each person is paid fairly for their services, buyers and sellers pay closing costs at the end of the transaction.
In total, closing costs make up about 5 to 10 percent of the home’s final selling price.
So, what are closing costs and what should you expect when selling or buying a home in Kansas City?
Here’s what you need to know:
What are Closing Costs?
Closing costs cover a myriad of expenses that your lender takes on during the sale of your property. For example, the home appraisal, title search, and ownership transfer fees are all part of this process and require multiple professionals to assist along the way.
However, the actual amount you pay in closing costs will depend on whether you are buying or selling the home. Buyers and sellers are responsible for different fees and will therefore pay different amounts.
Closing Costs for the Buyer
Buyers can expect to pay anywhere from 2 to 5 percent in closing costs. Using a home valued at $100,000 as an example, the buyer may expect to pay between $2,000 and $5,000 in closing fees. These fees may include:
Appraisal Fees
Lenders want to make sure they’re not lending more money than the home is worth. The buyer will cover the appraisal fee at the time of closing.
Home Inspections
Though home inspections are not required, they can be invaluable to a buyer’s peace of mind. This fee includes hiring a licensed home inspector to give a fair appraisal value of the property and differs from provider to provider.
Attorney’s Fees
The attorney handling the home sale transaction will receive a portion of the closing costs for their services.
Loan Application Fees
Lenders usually charge a loan origination fee, which is typically 0.5 to 1 percent of the loan amount.
Title Fees
Searching for the title and transferring it to the new owner incurs a fee. It’s a time-intensive process ensuring the title is free of liens and eligible to be transferred.
Mortgage Points
Some buyers purchase discount points on their mortgage to lower their interest rates. This is not a requirement, but it can help to save money in the long run.
Closing Costs for the Seller
Sellers usually pay a little more in closing costs compared to the buyer, about 8 to 10 percent of the home’s final selling price. This figure is so high because sellers pay real estate commissions to both the buyer’s and seller’s agents, which totals 6 percent on average. In addition, sellers can expect the following expenses:
Title Insurance
Title insurance is important in case an issue with the title arises after the home sale. The average cost is $1,000.
Mortgage Prepayment Penalties (if applicable)
Some mortgages may incur a penalty if paid off early. Check with your lender to see if this charge applies.
Transfer Taxes and Recording Fees
You may be charged taxes on the sale of the home. In addition, you will need to pay to have the deed transferred to the new buyer and recorded with the county office.
How to Save on Closing Costs with Upsell
If you’re selling a home, Upsell may be able to get you more money for your home, make much-needed upgrades to increase its value, and pay only after your home sells. Use those extra earnings to offset your out-of-pocket closing costs.