What Are Closing Costs And Why Should You Care?
“Closing cost” is often regarded as an undefined, generic term that has raised many seller and buyer inquiries. Different parties in a residential real estate transaction can define costs associated with transactions in various ways, which is why it’s crucial to have a precise and complete picture of what’s to be considered in selling the Florida condominium or house and what it is likely to cost.
Settlement, also known as closing, is the final step in an actual property transaction. When closing occurs, money is paid from the buyer (and mortgage lender, if applicable) to the seller, possession is legally passed from the seller to the buyer, various transaction charges or fees are paid, and the documents associated with the sale as well as a mortgage are filed at the local county.
The term “Closing Costs” refers to the charges and fees that buyers and sellers pay either out of pocket or as the result of a debit on their settlement statements that are not included in the purchase price, deposit amount, down payment, or mortgage loan amount.
Based on who you’re asking for, certain charges paid in connection with the sale of real estate are included in the closing costs, and others are not. This is the reason for a lot of confusion, as the majority of charges are pass-throughs from third parties, which can be categorized differently by the various service suppliers to the transaction.
While reading this article, remember that whether the transaction-related cost is classified as a Closing Cost, any expense or cost that is not part of the sale price in the contract is nonetheless an additional cost that the seller or buyer must pay.
Let’s take a look at some of the costs that are associated with closing an actual property transaction, classified by the person who is receiving the funds :
- Lend Charges (Buyer paid when financing)
- Origination, processing, underwriting charges
- Credit report (POC – – see below*)
- Points can be employed to “buy lower” the rate of interest
- Per-diem per diem (charged for the days following closing but before the scheduled first mortgage payment)
- 3rd-Party Provider Fees (Buyer as well as seller each paid)
- Property Appraisal
- Survey and Elevation Certificate
- Property insurance – hazard windstorm, flood (POC*)
- The cost of an attorney or a title company for the conduct of settlement
- Title search and title insurance
- Code violations lookup
- Inspections of the home, pest and wind mitigation (POC*)
- Commissions on real estate (usually made from the proceeds of the sale)
- HOA / COA application and transfer charges (POC*)
- Association estoppel fees
- HOA / COA assessments (pro-rated according to date of closing date)
- Government and Municipal Charges (Buyer and/or Seller separately paid)
- Taxes on property (pro-rated for date of closing date county)
- Stamps for documents (transfer tax) on the deed (.7 percent of the cost of sale (state)
- Doc stamps on mortgages (.35 percent of the mortgage amount – State)
- Intangible tax on mortgages (.2 percent of the mortgage – State)
- Public records record charges (County)
- Transfer taxes to an incorporated town or City
- CDD as well as MSTU Pro-rations, payoffs, or MSTU (local special-purpose taxing zones)
- Escrow funding (Buyer paid)
Suppose mortgage financing is used to purchase the home. In that case, a portion of homeowners insurance and the tax payment for the property is paid with monthly mortgage payments and deposited in an Escrow account by the servicer for mortgages. This is to ensure that enough of the money borrowed by the borrower or buyer is in escrow to pay the upcoming tax and insurance bill when the bills are due. The inability to pay either of these can place your loan in default. Escrowing decreases the risk of not being paid.
Following the closing date, between 2 and 6 months’ insurance and property tax payments may be required to be paid in escrow upon the time of closing.
Pro Tip: Insurance is paid in advance (for the next year), and taxes are paid in arrears (for the prior year). This is why lenders need proof that the first full year’s insurance premium is being paid before closing. It is in addition to the initial escrow funds.
* Certain out-of-pocket costs for buyers are also paid outside closing (POC). They may not appear in either the preliminary or final settlement statements.
POCs can include :
- Property Appraisal
- Credit report to finance
- Premium for the first year of insurance
- HOA / COA application fees
- Home inspections (not mandatory, but highly suggested)
In this case, in Florida, the type of contract (and the specific boxes being checked) used to record and monitor the transaction will indicate whether the seller or buyer has to pay specific fees that can be negotiated.
However, nearly everything in the Florida real estate transaction can be negotiated between seller and buyer. “Closing cost” is often regarded as an undefined, generic term that has raised many seller and buyer inquiries. Different parties in the residential real estate transaction can define costs associated with transactions in various ways, which is why it’s crucial to have a precise and complete picture of what’s to be considered in selling the Florida condominium or house and what it is likely to cost.
Settlement, also known as closing, is the final step in a real estate property transaction. When closing occurs, money is paid from the buyer (and mortgage lender, if applicable) to the seller, possession is legally passed from the seller to the buyer, various transaction charges or fees are paid, and the documents associated with the sale as well as a mortgage are filed at the local county.
The term “Closing Costs” refers to the charges and fees that buyers and sellers pay either out of pocket or as the result of a debit on their settlement statements that are not included in the purchase price, deposit amount, down payment, or mortgage loan amount.
Based on who you’re asking for, certain charges paid in connection with the sale of real estate are included in the closing costs, and others are not. This is the reason for a lot of confusion, as the majority of charges are pass-throughs from third parties, which can be categorized differently by the various service suppliers to the transaction.
While reading this article, remember that whether the transaction-related cost is classified as a Closing Cost, any expense or cost that is not part of the sale price in the contract is nonetheless an additional cost that the seller or buyer must pay.
Let’s take a look at some of the costs that are associated with closing an actual property transaction, classified by the person who is receiving the funds :
Lend Charges (Buyer paid when financing)
- Origination, processing, underwriting charges
- Credit report (POC – – see below*)
- Points can be employed to “buy lower” the rate of interest
- Per-diem per diem (charged for the days following closing but before the scheduled first mortgage payment)
3rd-Party Provider Fees (Buyer as well as seller each paid)
- Property Appraisal
- Survey and Elevation Certificate
- Property insurance – hazard windstorm, flood (POC*)
- The cost of an attorney or a title company for the conduct of settlement
- Title search and title insurance
- Code violations lookup
- Inspections of the home, pest and wind mitigation (POC*)
- Commissions on real estate (usually made from the proceeds of the sale)
- HOA / COA application and transfer charges (POC*)
- Association estoppel fees
- HOA / COA assessments (pro-rated according to date of closing date)
Government and Municipal Charges (Buyer and/or Seller separately paid)
- Taxes on property (pro-rated for date of closing date county)
- Stamps for documents (transfer tax) on the deed (.7 percent of the cost of sale (state)
- Doc stamps on mortgages (.35 percent of the mortgage amount – State)
- Intangible tax on mortgages (.2 percent of the mortgage – State)
- Public records record charges (County)
- Transfer taxes to an incorporated town or City
- CDD as well as MSTU Pro-rations, payoffs, or MSTU (local special-purpose taxing zones)
Escrow funding (Buyer paid)
- Suppose mortgage financing is used to purchase the home. In that case, a portion of homeowners insurance and the tax payment for the property is paid with monthly mortgage payments and deposited in an Escrow account by the servicer for mortgages. This is to ensure that enough of the money borrowed by the borrower or buyer is in escrow to pay the upcoming tax and insurance bill when the bills are due. The inability to pay either of these can place your loan in default. Escrowing decreases the risk of not being paid.
- Following the closing date, between 2 and 6 months’ insurance and property tax payments may be required to be paid in escrow upon the time of closing.
Pro Tip: Insurance is paid in advance (for the next year), and taxes are paid in arrears (for the prior year). This is why lenders need proof that the first full year’s insurance premium is being paid before closing. It is in addition to the initial escrow funds.
* Certain out-of-pocket costs for buyers are also paid outside closing (POC). They may not appear in either the preliminary or final settlement statements.
POCs can include :
- Property Appraisal
- Credit report to finance
- Premium for the first year of insurance
- HOA / COA application fees
- Home inspections (not mandatory, but highly suggested)
In this case, in Florida, the type of contract (and the specific boxes being checked) used to record and monitor the transaction will indicate whether the seller or buyer has to pay specific fees that can be negotiated.
However, nearly everything in the Florida real estate transaction can be negotiated between seller and buyer.
