Closing is the final stage in a real estate purchase/sale transaction wherein various items are finalized, loose ends tied up, and the title is transferred from owner to the buyer. In most cases, this involves two major aspects of the transaction: signing real estate documents and paying various closing costs.
Closing costs are monetary amounts that are paid during the closing portion of the real estate sale or transaction. Before title can be conveyed to the purchaser, all closing costs must be paid off. These are basically costs that are accrued outside of or in addition to the actual sales price of the home or property.
Closing costs typically constitute anywhere from 2 to 5 percent of the sales purchase price. Closing costs can include fees and other costs such as:
- Attorney fees, brokerage commissions, and other costs paid to professionals
- Appraisal and inspection fees
- Costs related to specific warranty issues
- Various tax-related costs and costs related to pro-rate issues
Closing costs may apply to either the seller or the purchaser depending on the factors.
During the initial stages of negotiation for the property transaction, the seller must provide a “good faith estimate” (GFE) to the buyer. This is a document listing the total costs that may be required at the end of closing. It includes various fees, services, etc. The actual cost at closing will of course be different, but the GFE is intended to give the buyer an estimate of the total costs.
During the closing process, a document must be signed and filled out by both parties, which is called the “settlement statement” (HUD-1). This form lists all the different closing costs, fees, expenses, and charges. It may also contain instructions on how the costs and loans are to be addressed in terms of payments.
Discrepancies over closing costs can often be resolved through the finalizing of the HUD-1. The closing costs can often fluctuate in the thousands of dollars from the good faith estimate up to the settlement statement.
Closing costs are an important aspect of any real estate transaction. It is in your best interests to hire a qualified real estate lawyer in your area if you need any assistance with a real estate transaction. Your attorney can provide you with legal advice and guidance during the negotiation and closing processes. Also, if you encounter any disputes, your attorney can provide you with legal representation in court if needed.