A common question among home buyers is how much they’ll actually end up paying to buy a home between the sales price and closing costs.
There are many expenses involved that can affect both sides of the table. These costs can get pricey too, especially with a higher sales price.
In this article, we’re going to discuss the various costs the Buyer will face when purchasing real estate.
Overview of Closing Costs
- Real Estate Agent?
- Offer Costs
- Attorney Fees
- Credit Report Fees
- Loan Origination Fees
- Survey Fees
- Appraisal Fees
- Discount Points
- Prorated Taxes/HOA Dues
- Escrow Fees
- Home Inspection Fees
- Documentation Fees
- Title Insurance Fees
- Other Insurance Fees
How Much Does Your Real Estate Agent Cost?
On the buying side, in almost every case, the real estate agent you select will be free to work with.
This is because the seller pays Realtor fees out of the sales price of the home, which is generally 6%.
It may seem strange that the agent is “free” to work with, but I look at it this way. The Seller is compensating the Buyer’s agent for bringing them a buyer.
It’s an old-fashioned way of looking at it, considering 93% of buyers are going online to find a house by themselves anyways, but that’s the idea.
There are scenarios where a buyer’s agent will ask for a retainer fee, compensation (typically $1,000) given to the agent before searching for homes.
It’s used to protect the agent so that they don’t waste time and money helping someone look for a house that isn’t serious about buying.
It’s rare to see retainers in real estate.
The Price of Making an Offer
In North Carolina, we use an earnest money deposit and a due diligence fee to lock ourselves into transactions.
The Earnest Money Deposit
The earnest money deposit is prevalent almost everywhere in the United States (I’m not sure where it’s not used). It’s a deposit used to protect the Sellers from a voided contract.
It’s generally 1% of the sales price, so $2,000 on a $200,000 house.
It’s credited to the buyer at the closing table as part of the funds put up for the sale.
The only way the Buyer can forfeit the earnest money deposit is if they void the contract after the due diligence period ends.
The due diligence period is a protected period where the Buyers can conduct inspections, appraisals, and whatever they deem necessary on the home while retaining the right to void the contract for any reason without losing their earnest money deposit.
The due diligence period ends at 5:00 PM on the date of due diligence (date is selected by the Buyers in the Offer to Purchase and Contract).
If the Buyer decides to void the contract during due diligence, then they forfeit the due diligence deposit. The amount of which varies by market.
Usually, higher-end communities will have a due diligence deposit of $300-$500. Low to middle-end communities will have anywhere from $100-$300 deposits.
These funds will be credited to the buyer at closing.
Any mortgaged real estate transaction will typically require a real estate attorney. These attorneys are in most cases selected by the Buyer in North Carolina.
Attorneys can cost anywhere from $500-$1,500 or more. It really depends on how large the transaction is and how much that particular attorney charges.
Find an attorney online or ask your real estate agent if they have any recommendations.
Credit Report Fee
The lender you select can pass off the credit check fee to you, which typically costs about $30.
You’ll get a credit check from all three major credit bureaus, TransUnion, Equifax, and Experian.
I would speak to your lender about any sort of fees in regard to loans, credit checks, etc. There are tons of little things that can pop up so be sure to get on the same page as your lender.
Loan Origination Fees
This is another one to talk to your lender about.
They can charge different fees, but in most cases, it will be 1% of the loan you’re seeking.
If the mortgage you’re getting is $200,000, then in most cases the origination fee will be $2,000.
If we stop here and look at how much you’ve amassed in fees on a $200,000 house, you’re over $5,000 with the deposits included.
The cost of a survey will depend on how much land is in question.
While the national average for land surveys are $400-$600. If you’re in an area like Asheville where the terrain is rough and the size of property varies greatly, costs can climb.
Definitely do some browsing for land surveyors if you want to know exactly how much land you’re receiving.
Generally, an appraisal of the home will be required as part of the underwriting process. This ensures that the loan is worth the value of the home.
Expect something in the range of $300 and above.
Seller’s can also be responsible for getting an appraisal as part of a concession, but this is situational and not always a guarantee.
Ask your real estate agent for more information on appraisals.
This is an optional expense but can prove valuable in the long run. As a buyer, you can choose to “buy down” your mortgage rate.
This comes in the form of points, which is usually equal to about 1% of the loan. Each point will pay off interest in advance so that you can build equity faster.
This is a conversation to have with your lender, as they can map out your amortization, your payment plan.
Prorated Property Taxes/HOA Dues
In North Carolina, property tax bills are distributed on September 1 and due on January 7 the following year.
This means that as a Buyer, you’ll need to pay for the part of the year you’re taking over the home.
Obviously, the amount you’ll pay depends on timing, so I found this calculator for you (Note: It’s a little complicated so I’d still ask a professional).
As for HOA dues, it depends on the HOA and how their calendar works but it will use the same concept of proration.
This can be split between the Seller and the Buyer, but it depends on the situation.
When you submit an offer on a home and it’s accepted, your deposits are given to a third-party holding account called an “escrow”. This can be the attorney’s office or a separate entity.
The whole point is to get it out of the hands of the two parties involved.
At closing, these funds are disbursed. A fee is collected for holding, which can be 1% of the sales price.
Home Inspection Fees
These fees can vary depending on how much you want inspected, but costs usually run from $250-$700.
Inspections can be general, or specialized, such as pests, well-water, etc.
You can do a simple Google search to find good inspectors in your area or you can ask your real estate agent for recommendations.
There will be a lot of documents involved in a purchase, especially involving a mortgage. A simple list would include:
- Courier Fee: Lender sends documents to the right people. ($20)
- Bank Processing: Bank is compensated for handling finance documents. ($25-$100)
- Recording Fee: County office files record of the transaction. ($50)
- Notary: Notaries make closings official. ($100)
Title Insurance Fees
The costs of title insurance depend on the size and location of the property, but it’s often a stipulation of the lender that someone pays for title insurance to protect from future claims against the property.
Costs generally fall from $500-$3,500 and can be negotiated with the Seller to decide who pays for what.
Other Insurance Fees
The lender may also request the purchase of homeowner’s insurance, mortgage insurance, and if the property is in a federally determined flood zone, then you’re required to pay for flood insurance.
All these costs will vary depending on the lender. For the FEMA Flood Maps, the cost depends on the risk severity of the area.
Hopefully, you have a better idea of what to expect in closing costs when purchasing your new home in North Carolina.
Bank of America has a simple closing costs calculator that you should find helpful.
Be sure to have open lines of communication with your Realtor, attorney, and lender so that you can make sure you have a smooth and clear closing.
If you have any questions, feel free to leave a comment below or navigate to the contact page.