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Welcome to my Real Estate advice column, “Dear Don,” where I answer all your burning Real Estate questions. Send yours to me at donkoonce@windermere.com, and I’ll try to answer them in future columns.
Dear Don:
How much are closing costs?
Curious Carl
Dear Carl:
Home buyer closing costs in Washington State range from about 1% to 3% of the purchase price, on average. But there are many variables that can affect the total amount you pay at closing. You should receive a detailed “Loan Estimate” document when you apply for a mortgage loan.
Closing costs tend to cause a lot of confusion among home buyers, especially among first-time buyers. That’s because there are many different costs involved with the average real estate transaction, and they can vary quite a bit.
Let’s start with a basic definition, just so we’re on the same page. “Closing costs” is a collective term that refers to the various fees and charged incurred during a real estate transaction. Most of these fees are paid at the closing, which is when the title of the property gets transferred from seller to buyer.
Some closing costs are paid by the buyer, while others are paid by the seller. And this is another point of confusion among first-time buyers, because it’s all negotiable. For instance, a buyer could ask a seller to contribute toward the buyer’s closing costs. Or the two parties could each pay their own. It varies.
Generally speaking, home buyers in Washington State can expect to pay somewhere between 1% and 3% of the purchase price.
Sellers tend to pay quite a bit more, partly due to the real estate excise tax. The seller usually pays the real estate agents’ fees as well, which can add up to thousands of dollars. But again, much of this is negotiable between buyer and seller.
What Home Buyers Pay For
Home buyer closing costs in Washington State can vary from one transaction to the next. Depending on your situation, you might not have to pay all the costs listed below. You could also encounter additional fees that are not on this list.
In a typical real estate transaction, home buyers in Washington State usually pay some, or all, the following closing costs:
- Half of the escrow fees. This varies based on the final agreement made between buyer and seller, as stated in the purchase agreement.
- Title insurance fees.
- Recording charges for all documents in the home buyer’s name. Recording fees are usually paid to the city or county to cover the cost of creating new land records.
- Document preparation fees, when applicable.
- Homeowners insurance paid through the first year.
- Fees associated with the mortgage loan. These can include origination fees, discount points, credit reports, processor fees and others.
These days, home appraisals are generally paid for at the time the service is provided. So they don’t get added into the closing costs in most cases.
The important thing to remember is that you’ll receive a standardized Loan Estimate form when you apply for a home loan in Washington State. The second page of this document includes an itemized list of closing costs to be paid by the buyer.
You’ll receive a second document, known as the Closing Disclosure, shortly before you close. This disclosure will include the actual, finalized amounts that must be paid.
Warmly,
Don
Are you ready to take the plunge into the Real Estate market? Don’t do it alone. My mission is to help you achieve your life goals. Contact me today at 206-250-7291 or donkoonce@windermere.com.
