Who Pays the Closing Costs? Closing costs are one of the most confusing concepts of the sale process for both buyers and sellers. This is completely understandable, because most real estate agents and loan officers do not effectively communicate what the closing costs are, who pays them, and what the net effect is. The first thing to understand is what the closing costs are for both the buyer and seller. Seller’s closing costs are composed of the following: • Realtor commissions for both the buyer’s agent and seller’s agent • Broker administrative fee • Title fees • State deed tax
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Buyer’s closing costs are composed of the following: • Property tax escrow • Homeowner’s insurance escrow • Loan fees, including rate buydown if applicable • Broker administrative fee • Title settlement charges • Lender’s and buyer’s title insurance Another thing to understand is that if the buyer is asking the seller to pay the closing costs in the offer—known as seller paid contribution to buyer’s closing costs—the seller never actually pays the closing costs. See the next page for an example that will hopefully clarify closing costs.
THE SMART SELLER
