Many people focus on the purchase price when buying residential property. But this is just one of many costs associated with closing on a home. Budgeting for these additional costs will ensure you make smart financial decisions.
1. Property Taxes
Property taxes are paid for the previous year. When a home is sold, the pro-rated taxes must be paid. The amount you have to pay will depend on the property assessment.
Depending on the agreement, the seller or buyer can pay the property taxes. They often get used as negotiating leverage before the closing.
2. Closing Costs
The closing cost category tends to be an umbrella term that can cover many fees. This could include some or all of these:
- Attorney fees
- Escrow fees
- Credit reporting fees
- Title insurance fees
- Points and prepaid interest
- Private mortgage insurance (PMI) premiums
- Title search fees
Some of these are services provided by real estate industry professionals, while others are part of your mortgage agreement.
3. Home Inspections
A home inspection is part of the closing process. The buyer wants an inspection because it confirms the property’s condition as the seller represents it. Potential damage or problems are identified during the inspection. The buyer can then decide whether to move forward with the sale or negotiate with the seller.
It is in the buyer’s best interest to hire a professional inspector to perform the inspection. If the buyer uses a lender, the lender will require an inspection because they are loaning the money to enable the buyer to purchase real estate. Because the property is the collateral for the loan, the lender will want to know that the property is the value claimed to adequately cover the loan.
When you buy homeowner’s insurance, the insurance company will also want a copy of the property inspection report. This will help the insurance company confirm the condition of the property at the time of the policy purchase. If the buyer is using a VA mortgage, an additional pest inspection may be required.
Inspection can vary in cost depending on where you are in Florida and the size of the home. The average home inspection cost is about $340.
4. Loan Origination Fees
If you take out a loan to purchase your residential property, additional fees are associated with this process. These are the fees that the buyer will pay as part of the loan process. The origination fee pays for the administrative tasks of processing your application and loan paperwork. Other loan fees include:
- Application fee
- Processing fee
- Underwriting fee
- Reporting
Origination fees can vary in price but are usually between .5 and 1 percent of the loan’s total value.
5. Documentary Stamps
Documentary stamps, or “doc stamps,” are excise taxes. They are paid when the ownership of a property is transferred from one person or entity to another. The tax is calculated as a percentage of the purchase price. The seller typically pays this tax. The rate for the tax is $0.70 per $100. The only county with a different rate is Dade County, where the tax is $0.60 per $100.
6. Home Appraisal
The home appraisal phase determines the fair market value of the home. This evaluation is done by a third party so that it is an unbiased assessment. If you get a mortgage, the lender will want an appraisal to validate the value. This ensures the loan approved is the appropriate amount for the property value. Many lenders will not approve a loan for more than the home’s fair market value.
Sellers can get an appraisal to help them determine an appropriate asking price. The price for an appraisal can vary, but it is usually a few hundred dollars.
Proper For Closing a Residential Property
Purchasing real estate in Florida requires you to prepare for closing a residential property. This is when many hidden costs can pop up. Knowing what they are can help you prepare for them by budgeting appropriately. That way, you can feel less stressed about the entire process.
Speaking with a real estate attorney can help you plan for these unexpected costs. Their guidance and experience can provide estimates for these costs in the local market.
Speak with our team of real estate attorneys to prepare for your residential property closing.
