Home Closing Costs: Your Real Estate Closing Costs Breakdown

Home Closing Costs: Your Real Estate Closing Costs Breakdown

How much does it cost to buy or sell a home? It’s not just about the price of the home and your down payment, there are also closing costs to consider when buying or selling property. Most buyers and sellers aren’t aware of all the different fees they need to pay at closing, and it can come as quite a shock when they see their final closing statement!

In California, your real estate closing costs will typically include escrow and title fees, taxes and liens, home warranty fees, HOA dues, lender fees, and commission. How much does it cost to close on a home in California? It depends on the county in which you purchase your property, but you can expect to pay around 2% of the purchase price in closing costs (not including commissions).

For example, if you buy an $800,000 house with 20% down ($160,000), your total mortgage amount is $640,000. You’ll need to bring an additional $16,000-24,000 for the other necessary fees and taxes.

Escrow and Title Fees in California (both buyer and seller)

Escrow is a neutral, third-party processing company that handles many aspects of your home purchase and sale.  They make sure that every aspect of the contract between buyers and sellers is met correctly and in a timely manner, that funds are transferred to the correct parties, and that the home sale is recorded with the county.

Title searches the history of the deed to ensure that there are no hidden claims to the property and insures the title to cover any claims that could potentially come up later.

Fees for escrow and title are based on the sale price of the property so they vary from purchase to purchase but you can estimate them at about 0.2-0.5% of the purchase price.  Escrow fees are not set and can vary from company to company.

Recording fee (buyer)

The first cost you’ll encounter is the recording fee, which is paid to the county recorder’s office. In California, this fee is $75 for the first page of the deed and $0.50 for each additional page. The title and escrow fees are paid to the title company or escrow agent and typically range from $700 to $1,500.

California natural hazard disclosure (per purchase contract, traditionally a seller cost)

According to California law, a Natural Hazard Disclosure Statement (NHDS) must be provided toward the beginning of your transaction. The NHDS is a document that describes the risks of natural disasters in the area where the property is located. These risks include things like earthquakes, wildfires, and mudslides. The NHDS also includes information on title and escrow fees. This is important information to have because it can help you decide how much risk you are willing to take on when buying a home.  The cost of the NHDS is approximately $150.

HOA Fees (per purchase contract, traditionally a seller cost)

Homeowners’ Association document and transfer fees are also a part of your closing costs and are charged by the HOA management company to provide CCRs, financials, and other documents.  The amount is determined by the property management company and is approx $500-700 per HOA.  Yes, some homes have more than one HOA!

Home Warranty (per purchase contract, traditionally a seller cost)

Buyers will typically request a home warranty within the offer to purchase a property that will help to cover the costs of some repairs should there be problems within the first year that they own the home.  Depending on the level of coverage and the items covered, a home warranty can cost anywhere between about $400-900.

Termite and other repairs (per purchase contract or repair request, traditionally a seller cost)

Termite and other pest repairs are a common cost associated with buying a home in California. Termite clearance is sometimes included in the offer to purchase or in the request for repairs submitted by the buyer to the seller.

Without a termite inspection completed prior to selling the property, there’s really no way to know what the cost will be.  Sometimes no work is needed and other times, the damage is extensive.  The termite inspection is about $100.

Other common repair costs include fixing leaks, repairing damage from previous pests, and making sure the home is up to code or other health and safety items. These costs can vary widely, so it’s important for buyers to get a thorough home inspection completed once an offer to purchase has been accepted.

Taxes and liens (either buyer or seller)

California real estate taxes and liens must be paid before the property can change hands. The tax bill is usually prorated so that the seller and buyer each pay their share of the property taxes up to the date of sale.

There could be liens placed on the property or the buyer.  Either way, they’ll need to be paid off or cleared before the property can transfer ownership.

Loan Fees (buyer)

Every loan is different so fees associated with obtaining a loan will come directly from the lender.  Buyers have many options including having a lender pay all the closing costs by charging a higher interest rate or paying higher lender fees in order to buy down the interest rate.  Talk to your lender to determine what approach is best for you.

Real Estate Agent Commissions (seller)

The real estate agent’s commission is typically the biggest closing cost for most home sellers. The average commission is about 5-6% of the sale price so, on an $800,000 home, the commission will be between $40,000-48,000.  The commission is split between the listing agent and the buyer’s agent.

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