The closing costs are the accumulation of taxes, fees, and expenses paid during the process of buying or selling a property. For the buyer, these costs can be around 4-6% of the price of the property purchased. Here is an explanation of some of theses costs that appear at the end of the process.
Earnest Money/Deposit – When there is an offer in a property, typically it is accompanied by a good faith deposit. This deposit is made into an escrow account, to be added to all moneys for the purchase.
Inspection & Appraisal – When the seller accepts an offer, the buyer should contract a licensed company to do a thorough inspection in the property. Typically, this inspection might cost between $200-$600, depending on the size of the property and what is included in the inspection (termites, additional insurance certificates, etc.). The Appraisal is made by the financing bank to ensure that the amount financed conforms to the value of the real estate, and might cost around $500. Along with the inspection, it is common to receive a Land or Elevation Survey for houses in Florida, which is a study of the area and required by the insurance companies.
Condominium Application – Almost all condominiums in Florida will require an application, and lots of documents. In addition, it is usually necessary to pay an application fee of $100-$200 per person.
Mortgage Fees/Finance Charges – Paid by the buyer to the financing institution, these are the processing costs of obtaining a loan. Sometimes these fees are paid directly to the bank, sometimes it is added to the closing costs.
Points – When a property is financed, the bank might charge points for financing the property to lower the interest rates. Each point equals 1% of the loan amount and could lower 1% of the interest rates. Government regulates the number of points that could be charged to prevent abuses. Not all financing includes points in their loans.Insurance – Title insurance is mandatory and required by the lending institution. Attorneys typically will not allow buyers to close without title insurance, which will cost typically around 0.05% of the value of the property. The condominium will also insist on home-owner’s insurance.
Taxes & Home Owner Association (HOA) – Based on the actual date of the closing, the taxes and home-owner association dues are pro-rated to each one, the buyer and seller of the property. Since the taxes are paid annually, if the owner already paid, part of the payment will be reimbursed to the seller. If the payment still needs to be made, then the seller needs to pay the buyer for the days the property was still in his name. Banks will require the buyer to retain six months of advance payment for taxes and HOA in an escrow account when they finance the property.
Title Search – The seller of a property must show that he is the legal owner of the property and that there is no pending lien or process against it. The title search can cost $15-$40. The title insurance in Florida is based on the value of the property, and typically can cost around $5.75 per each $1,000.
Document or Transaction Stamps or Taxes – This fee is required by law in Florida and charged by a government entity as an excise tax upon the transaction. This cost is paid by the seller, and the cost is $0.70 per $100 of the value of the property.
Attorney – Either seller or buyer can be represented by an attorney during the real estate transaction. Sometimes the attorney may do the title search and combine some of the costs. Typically, their costs hover around $1,200 around $1,500 per transaction.
Other costs – Examples are express mail, adjustments, or copies.
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