What Closing Costs are Involved in a Typical Home Sale in San Diego?
One of the most frequent question we get asked at Sell Your House Direct is: what closing costs are associated with a cash sale? As one may expect, closing costs will always be involved in a real estate transaction. During a traditional sale, with a real estate agent, closing costs are typically negotiated as part of the sale…and most often, the bulk of those costs fall onto the seller. Much of this is determined by what type of market it is, and in California, we often live in a seller’s market due to high demand and strong buyer competition. But in most cases, the buyer is typically responsible for the majority of the closing costs that you will see below. Because homeowners are sometimes unaware of what is included in closing costs, especially first-time homebuyers, we thought it would be a good idea to outline what you can expect.
What charges can be expected when closing in California?
- Loan origination fees (usually 1 or 2 percent of a loan total)
- Loan processing fees (flat fee, typically $400)
- Underwriting fee (flat fee, $500)
- Appraisal fee (flat fee, $450)
- Credit report check ($25-35)
- Flood area certification (flat fee, $50)
- Escrow account servicing for property taxes ($75)
- Title insurance ($175)
- Title fees (filing fees, $180)
- Governmental recording fees (flat fee, $125)
- Documentary transfer taxes (percent of final sale price)
- Homeowner’s insurance (varies on insurance provider, $1,000-$1,500 annually)
- Settlement company for escrow processing ($flat fee, $175)
- Wire and courier services for paying sale (flat fee, $175)
Some additional fees that are often forgotten about include: any unpaid homeowner dues by the seller, all unpaid delinquent taxes (if applicable), interest accrued to the lender need to be paid off, and any additional tax proration fees.
Buyer Requested Repairs
Lastly, in additional to the typical closing costs you see in a transaction, buyer requested repairs can’t be forgotten. After required inspections (termite, health & safety etc.), you may be asked to cover the costs for needed repairs. Many times, these repairs will include plumbing work, electrical work, HVAC or heating systems and other cosmetic repairs. Agreeing to repairs in usually your best move in a traditional sale, otherwise, you run the risk of your buyer cancelling escrow and moving on to something else. Some buyers may potentially ask for cash for repairs, in lieu of having them fixed before the sale proceeds.
Real Estate Commission Fees
Usually the biggest cost absorbed at the closing of a real estate transaction is that of the agent commission fees. Granted, a great agent will have earned that commission by properly marketing your house to sell at Top Dollar, but there is not guarantee for this. And if you choose to sell traditionally, the cost you pay an agent is the largest fee you will pay. It’s commonplace that most Realtors will charge 5-8% total for representation during a sale. On average, the agent commission fees in California will fall closer to 5-6% . If you are the seller, you are responsible for paying all of the agent commission fees. So, you pay the 2.5-3% to your agent, and to your buyer’s agent. But, in an area like San Diego where average home prices hover around $495,000, that means $29,700 that as a seller, you will have to pay out of the proceeds of your home’s sale.
Avoid Closing Costs by Selling Direct
While some closing costs are negotiable, the only way to avoid closing costs and agent commission fees altogether is by selling direct to a cash investor buyer. Not all cash buyers will cover all closing costs, but some cash buying companies like us will. There are virtually no fees to be paid by you, the seller. And because there are no agents involved in the sale, you pay nothing. Here in California, that could be savings of $35,000-50,000 and upwards depending on the price of your home. Keep this in mind when receiving a cash offer- while it may not be as high as a market value offer, you won’t have to pay any of the additional fees mentioned in this article with the proceeds of the sale. Maybe even better, you will not be requested to make any repairs. What you’re offered, is exactly what you net.