What are closing costs? Seems like a simple question, but there is a lot of confusion about what these fees are, who charges them and really the most important thing is how much the fees are going to be. So that is exactly what we’re going to be talking about today.
Hi there, my name is Johanna Dueren and I am a real estate agent with Circa Properties here in beautiful St. Louis, Missouri. Coming to you today with the Coronavirus, quarantine concert t-shirt, kids screaming in the background episode of everything you ever wanted to know about real estate. So apologies in advance for any background noise, dogs barking, children running, dropping things. It just, it’s going to happen.
So back to the topic at hand, what are closing costs? On a basic level, closing costs are the fees that are going to be charged to you by the vendors that you’re working with to either buy a property or sell a property. That could be your lender, if you’re purchasing a home. It could be the title company that you’re working with. It could be the real estate agent that you’re working with to either buy or sell a home.
So the fees come from multiple places and the most important part of the question is how much are the fees going to be? But first, let’s break it down by whether you’re purchasing or whether you’re selling to figure out where the fees are going to come from. So if you’re buying a property, the majority of your fees are going to come from the mortgage company that you’re working with. What are closing costs? If you’re using a lender, if you’re paying cash, then never mind, you can move on, you don’t have to watch the rest of this video. If you are buying though and you’re using a lender, a lot of your fees are going to come from the lender. You are also going to have title fees for your title insurance and you may or may not have a fee from your real estate agent.
Now, the real estate agent typically on the buying side isn’t going to charge you a commission. But most, if not almost all of the real estate companies here in St. Louis do charge the buyer a small fee, whether it’s anywhere from $100 to $200 to $300, just as a transaction coverage. It helps cover the cost of whatever their back office fees are for their office, but most of your charges are going to come from your lender. What are closing costs? Now if you’re selling a property, then the fees are going to be a bit different. So most of your what are closing costs fees are going to come from your real estate agent. Most of the time, at least in the state of Missouri, the listing agent is going to collect the commission for both the listing side and for the buyer’s agent as well. So depending on how much your house is selling for the commission rate might vary, but for the most part, your largest closing cost is going to come from your real estate agent.
You also are going to have title fees though as well, so keep that in mind when you’re trying to learn what are closing costs. Now, here’s the fun part of the what are closing costs game is trying to figure out what the closing costs are going to be. So if you are buying a property, and like I said, your biggest what are closing costs are going to come from your lender. It’s super easy to get in touch with your lender and figure out what an estimate of those what are closing costs are going to be. I actually just read a really hilarious article a couple of weeks ago, I think it was a U.S. News and World Report article that said that what are closing costs for a buyer could be anywhere from $6,000 to $15,000 now that’s a $9,000 difference. To me, I’m not comfortable getting ready to close on a property, not knowing if I’m going to need to bring an extra $6,000 or $15,000 to the table. What are closing costs?
So the very first thing that you can do is get in touch with your lender, make sure you’ve got a quality lender, and maybe even interview more than one lender and get the closing cost estimate from them. The closing costs are going to vary based on the kind of loan that you have. It’s going to vary based on your credit. It might even vary a little bit based on the type of house that you’re buying, so your lender can tell you in advance what an estimate for their portion of the closing costs are going to be. In addition to that, you can also get an estimate for what are closing costs for your title insurance. Usually the title company is one of those things as a buyer that you just hear your real estate agent talking about. You kind of have no idea what it really all means.
If you have a really good real estate agent, they will sit down and explain to you what the title portion of the program is all about, because quite honestly it’s one of the most important parts of the transaction. But your real estate agent can get in touch with the title company and get you an estimate for the title portion as well. And then lastly, find out from your real estate agent up front, you will typically see this on a buyer’s agency agreement, if your buyer’s agent is going to charge you a transaction fee. Then you can sit down, you can add it all up and you won’t be surprised when you get to the closing table.
If you’re selling a property equally as easy, so the bulk of what are closing costs are going to come from your real estate agent. It’s a simple math equation. You’re going to take the percentage that you’re being charged, multiply it times what we think the house is going to sell for you. You get in touch with your real estate agent, you find out if you can get a estimate for your title costs from the title company as well and sit down and add all those things together. And something that I do for all of my clients that are listing is I have an Excel spreadsheet that I will send all of my clients where we can plug in all of the numbers. to find out what are closing costs. We can plug in the commission rate, we can plug in what we think the prorated taxes are going to be. We can plug in what the title costs are going to be and it will you give an estimated net of what we think we’re going to come out with, at the end of the transaction. What are closing costs?
So that may be something if you’re not in the St. Louis area, ask your realtor in your area if they might have something like that. It’s a really great tool to know what is going to happen when you get to the closing table so that there are no surprises. I hope this information was helpful on what are closing costs. Please subscribe down below. Hit that notification bell so that you know when new videos pop up. I do new videos every week and if you would like to get a copy of the seller’s net spreadsheet that I was talking about, just shoot me an email or a comment down below and I’ll get in touch with you and get you all the information. Thanks and what are closing costs?