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“How much is this closing going to cost?” asks the buyer.
“How much money am I going to receive in my pocket after the closing costs?” asks the seller.
These are two frequently asked questions as buyers and sellers think about closing a deal. In this blog post, we will review some of the most important closing costs for buyers and sellers, which are costs related to title services, and which costs are mandated and set by government regulation.
The first place to start understanding who must pay which costs is the Purchase and Sale Agreement. In the FARBAR AS IS version of the contract, you can find the distribution of cost in Section 9 – CLOSING COSTS, FEES, AND CHARGES. We will focus on the first three sections and briefly explain the meaning of the different costs.
Seller Costs
- Deed Documentary stamps taxes and surtaxes – Documentary stamp taxes are taxes on documents that transfer interest in Florida real property, such as warranty deeds and quit-claim deeds. In Florida, the tax is $0.70 per every $100 of property value (or proportion). The Miami-Dade County rate is $0.60 on all documents plus $0.45 surtax on documents transferring anything other than a single-family residence, for example, a commercial building).
- HOA/Condo Estoppels – These are fees imposed by Condos and HOAs for providing documents and statements (known as estoppels) showing the status of payments made to them by the seller. If the seller owes any past fees, the estoppel will reflect any balance. Estoppels should also reflect if the condo or HOA have any pending special assessments or litigation against the association. These fees vary widely depending on the association.
- Recordings and other fees needed to cure title – Recording is the act of registering a document into the official public records. Usually, the types of documents that are recorded affect title to real property. The costs for recording documents are $10 for the first page and $8.50 per additional page.
- Title Related Costs – Title related costs include title insurance, title search, lien search. These costs are assigned to the buyer or seller depending which option is chosen in section 9(c).
Buyer Costs
- Taxes and recording fees on notes and mortgages – Tax rates and recording fees on notes and mortgages are set by the state and are required payments in cases where buyers purchase a property with a loan.
- A mortgage doc stamp tax must be paid in all transactions where the buyer is obtaining a mortgage. It is calculated as $0.35 per 100 in value.
- Mortgage intangible tax is a buyer cost that is calculated as $0.20 per 100 on the mortgage amount.
- The length of a mortgage document varies, but mortgages from commercial lenders can sometimes be more than 20 pages. The costs for recording documents are $10 for the first page and $8.50 per additional page.
- Recording fees for deed and financial statements – The length of a deed document is usually three to four pages. The costs for recording documents are $10 for the first page and $8.50 per additional page; this is government fee.
- Boundary Survey – A survey is required on any purchases done with a mortgage. Surveys are optional on cash deals, but always highly recommended. Surveys are not performed on condo properties. The cost of a survey varies depending on the size of the property. There are different kinds of surveys; a Boundary Survey is required for purposes of clearing title and closing. However, if Buyers plan to do any kind of construction on the property, perhaps a Construction Survey may also be needed.
- Loan Expenses and Appraisal Fees – The cost of an appraisal and other loan expenses are those associated with a loan obtained from a lender in a purchase of property. These expenses are variable and will depend on the lender and the appraiser.
- HOA/ Condo Application – Condos and HOAs usually have fees associated with applying. They vary widely depending on the association.
- Buyer’s Inspector – Buyers usually have an “inspection period” where they can inspect the house and understand its current condition. A buyer can choose to waive the inspection period. If the buyer chooses to do an inspection, there is no technical requirement to hire a certified inspector. However, it is highly recommended a formal inspection is done by a certified inspector before purchasing a house, and this would be a cost the buyer incurs as part of their due diligence of the home.
- All property related insurance – Property insurance is a policy that provides financial reimbursement to the owner or renter of a structure and its contents, in the event of damage or theft. Property insurance can include homeowners insurance, renters insurance, flood insurance and hurricane insurance. Property insurance should not be confused with title insurance. Property insurance relates to the physical condition of the property whereas title insurance related to the legal conditions of the property. Property insurance is a requirement when a loan is taken to purchase a property, and is recommended for all homeowners.
Title Related Costs
Title related expenses are distributed amongst buyers and sellers according to the Purchase and Sale Agreement. In the FARBAR AS IS contract, the distribution of title related expenses are specifically governed by the options under section 9(c). Below is a summary of these expenses and who pays for them. Download Summary of Title Related Expenses.
- Owner’s Title Insurance Policy – An Owner’s title insurance policy protects buyers from financial loss due to defects in title commonly found in public records. Rates for title insurance are regulated by the state of Florida and are published as minimum promulgated rates. It is important to review the rates being charged to a buyer to ensure they are not being overcharged.
- Who pays for what? Depends which option is selected on 9(c).
- Option (i) – Seller Pays
- Option (ii) = Buyer Pays
- Option (iii) = Buyer Pays
- Who pays for what? Depends which option is selected on 9(c).
- Lender’s Title Insurance Policy – A lender’s title insurance policy protects lenders from financial loss due to defects in title commonly found in public records. A lender’s policy is required by law when a loan is involved. When a buyer obtains an owner’s policy simultaneously with a lender’s policy, the lender’s policy is not charged at full cost, but rather a “simultaneous policy” charge of only U$25 is charged, plus any corresponding “endorsements” required by the lender to insure the lender. Endorsements have different costs; some endorsements have a fixed cost and some are tied to the value of the insurance policy.
- Who pays? A lender’s title insurance policy is always a buyer’s cost.
- Title Search – A title search is a detailed search of the property records for your home. The search, performed by an attorney, will look at prior deeds, court records, property and name indexes, and many other recorded documents. This is to ensure that there are no liens or problems associated with your ownership of the property.
- Who pays? Depends which option is selected on 9(c).
- Option (i) – Seller Pays
- Option (ii) = Buyer Pays
- Option (iii) = Seller Pays
- Who pays? Depends which option is selected on 9(c).
- Municipal Lien Search – A Municipal Lien Search will thoroughly investigate any violations, permits, unrecorded liens, taxes and utilities that are associated with the property. Lien search costs vary depending on the city and county where the property is located. Lien search turnaround times also vary. Here is a Guide to Lien Search Turnaround Times in Miami-Dade and Broward Counties.
- Who pays? Depends which option is selected on 9(c).
- Option (i) – Seller Pays
- Option (ii) = Buyer Pays
- Option (iii) = Seller Pays
- Who pays? Depends which option is selected on 9(c).
So who pays for what when buying or selling a home? “It depends!” The exact answer, however, lies in the Purchase and Sale contract.
CLOSING QUOTE
To provide you an estimate of buyer or seller closing costs and proceeds, please provide us with the information below:
General Information Required for All Quotes
- Name of your client
- Property Address (include unit number) and County
- Purchase Price
- Estimated Closing Date
- Is the property governed by an association (HOA and/ or Condo Association)?
- Who is paying title related expenses: buyer or seller?
(NOTE:If you are negotiating or have executed an FAR/BAR AS IS contract, which option has been agreed upon: 1. [ ]9(c)(i) – Line 158 | 2. [ ]9(c)(ii) – Line 162 | 3. [ ]9(c)(iii) – Line 164
If you would like projected closing costs for a BUYER:
- Will this property be purchased in cash or with financing? If there is a loan, what is the amount of the loan (or percentage of the purchase price that will be covered by a loan)?
- Does the buyer need to pay any broker processing fees? If so, what is the amount of the broker processing fees?
- Are there any credits provided to the buyer from the seller or brokers?
If you would like estimated closing costs and seller proceeds for a SELLER:
- Is there a mortgage on the property? If so, please provide the amount of the mortgage.
- Please confirm the total commissions and broker fees to be paid by the seller?
- Are the sellers U.S. Taxpayers or are their foreigners (do not have a SS# or do not pay annual income taxes)? (FIRPTA may apply to non-US taxpayers).
- Is the seller providing any seller credits?
- Are the brokers providing any credits to the buyer or seller?
With this information, we are happy to provide you an estimate within one business day. Please email us to quotes@foliotitle.com or if you have any questions associated with any of the topics discussed here, please don’t hesitate to contact us at hello@foliotitle.com or 786-888-6640.