Blue Ridge Real Estate

Real estate custom primarily dictates that, but of course it depends on the willingness of the buyer and the seller and the negotiations between them.

Costs traditionally falling to the seller are as follows:

Of course, probably the largest of these expenses is the brokerage commission he owes for the procurement of the buyer, usually 5 to 6% of the selling price of the home.

Then, most other charges are associated with his house, like termite inspection, and any repairs that are found to be needed which result from this or the buyers overall inspection.

The seller must also pay off all such loans and liens that have been secured against the property, as well as taxes and insurance pro-ration up to the very date of closing. This pro-ration is often referred to as apportionment. This line often turns out to be a credit for him since he has often already paid such fees through the end of the year and through pro-ration now receives a credit back.

The cost of title insurance usually falls to the seller as well.

Costs which usually accrue to the buyer:

Again the largest will be the down payment and fees associated with the procurement of a new loan on the house, and these vary from loan to loan (they may be partly tucked in to the mortgage he is assuming).

Costs for the buyer also include a house inspection fee, though any repairs need then fall back on the previous owner of the house.

Home protection plan insuring the major components and systems in the house (such as the foundation, plumbing and electrical, the heating and air conditioning) and providing for their repair or replacement should they need it during the maiden year of buyer occupancy.

Then there s the PMI (Property Mortgage Insurance) which protects the lender against buyer default and falls to borrowers who have an insufficient down payment.

Then there are the pro-rations for property tax and hazard insurance from closing date to the end of that fiscal year.

One area where the buyer may save on these up-front charges is with the cost of the loan: He may have the option of paying a higher interest rate over the length of the loan rather than payment the percentage points as an initial expense.

Both seller and buyer have their share of closing fees, attorney fees and transfer taxes.

Remember, the closing costs for the seller may be taken out of his equity in the home, so that he doesn t generally have to come up with money for closing, but the buyer does. The lender, for his own protection, wants to make sure this prospective mortgagee is prepared financially and so in order to qualify for the loan the buyer must show at the outset that he already has sufficient funds set aside for these closing costs. This qualification may also extend to having cash reserves over and above these closing costs to cushion early home ownership and settling in costs.

Here is an interesting idea for those buyers who are marginally qualified for the purchase of a house. Whereas most lenders will not allow the seller to pay money toward the buyer s down payment (as this money applied to their equity is thought to secure the repayment of the loan), they will allow them to pay some of the buyer s closing costs. And it may well be in the interest of the seller to give this buyer the boost he needs for the consummation of the deal.