Salt Lake City Homes & Condos: Closing costs and fees
Closing costs are fees that a real estate Buyer and/or Seller incur to buy or sell a property. These fees are related to the loan, escrow accounts, title insurance, inspections and other items. The Buyer’s total closing costs are typically between 2%-4% of the purchase price of the home.
The lender will almost always allow the Seller to pay for some or all, of the Buyer’s closing costs and pre-paids. The Seller will likely want a higher sale price to compensate for this, but as long as the home appraises for the agreed to purchase price, the closing costs can be negotiated in. In a hot Seller’s market, this can be more difficult to accomplish, but in a buyer’s market it’s usually possible.
Here are some of the more significant closing costs you can expect. Keep in mind that most or all of these are paid at the closing which is one of last steps of purchasing your Salt Lake City home or condo.
Loan Origination Fee:
This is the fee that the lender charges for doing the loan for you. The price ranges, but is typically about 1% of the loan amount. This is a negotiable item and can vary with changes in the interest rate.
The home you are buying must appraise for at least the agreed to purchase price for the lender to lend on it, unless you want to bring the difference to closing. If there is a loan involved in the purchase of real estate, there will be an appraisal. The cost of an appraisal varies from $300 to $400 for most homes and condos in Salt Lake City Utah. This can be paid for in advance, but it usually paid at the time of the closing.
The cost of a title insurance policy depends on the price of the home and the amount of the loan. In Utah, the Seller pays for a policy of Title Insurance for the Buyer and the Buyer pays for a policy of Title Insurance for the lender in the amount of the loan. These fees are regulated by the State of Utah.
The Title Company charges for smaller items in addition to the Title insurance. Some of these fees include recording fee, courier & overnight fees and notary fees. These fees will normally be a few hundred dollars and are regulated by the state of Utah.
In Salt Lake County, property taxes are paid on November 30th for that calendar year. So taxes for 2010 are due by November 30th, 2010. However, some people pay their taxes monthly. If the Seller hasn’t yet paid the taxes because the closing was date was prior to November 30th , the Buyer will get a credit from the Seller for the time the Seller lived in the home. If the closing is right after the seller paid the taxes, like December 15th . Buyer owes seller for a credit for the 15days. If the Seller pays monthly adjustments are made based on this.
Prepaid Interest: Interest on your loan accrues in arrears
When you make your mortgage payment you are paying for last month. So interest builds up and you pay it down, it builds up again next month, and you pay it down again. So what you owe goes down a little bit every month. It's the opposite of rent. Rent you pay at the beginning of the month so you can stay another month.
When you close on a house, you will pay for the interest that accumulates from the last day of the month back to the day you close. For example, if you close on the June 20th, there are 30 days in the month of June, so you’d pay 10 days of interest as part of your closing costs. The good news is you skip a month before your first payment is due. If the closing date was June 20th, your first payment would typically be due by August 1st.
Home Owners Insurance:
The lender requires that you have one year of home owners insurance on the property paid in advance before they will close the loan on your new home.
Prepaid Escrow for Property Taxes & Insurance:
The lender requires that you start an escrow account so they can pay your property taxes and home owners insurance when they come due. This is a standard practice, unless you put 20% down.
Nearly all Buyers who purchase a home or condo in Salt Lake have a home inspector do a physical inspection of the mechanical systems of the home. This usually costs about $300 and up. These fees are typically paid at the conclusion of the inspection, not at closing. There are other inspections that you can do at an additional cost.
In the state of Utah, a lawyer does not typically handle the closing, a Title officer does. This is not to say you should not hire a lawyer, but for single family homes, it is not a typical practice in the State of Utah.
Surveys take time and money and many buyers of existing single family homes in the established parts of Salt Lake City Utah don’t do a survey. It’s up to you the buyer, and there are times where it makes sense to do one. The cost of a survey starts at around $700 and goes up from their depending on the level of survey you are doing.
If your plan is to move from one home to another, just putting your home on the market isn’t enough. Your home will need to be ready to show and you’ll need a strategy to accomplish the sale and purchase of another home in a reasonable time frame.
With 10 years selling homes in metro Salt Lake and 20 years in the real estate business, I have many strategies and an in depth understanding of what it takes to help you sell and buy another home. Call or email me if you’d like to take advantage of this opportunity!