Who Pays Closing Costs California?

Buying or selling a home carries with it alot of expenses – often for both parties. This can come in the form of agent fees, taxes, property inspections, and other closing costs. And while for some of the other expenses that come when selling a house, it’s quite clear who is responsible for paying these costs. But with closing costs, not so much – there are times when the seller is responsible for covering them, and other times when the buyer is.

Selling your home to a cash buyer like Trusted House Buyers is one of the only ways to avoid all of these closing costs all together. We are one of the top cash house buyers in San Diego, who focus on providing a stress-free experience for home owners and covering all closing costs associated, period. This however, is not always the case with other buyers in a traditional market sale. 

Read on below to learn about what exactly closing costs are, and who pays the closing costs in California.

What Are Closing Costs?

Closing costs are the incidentals incurred by house buyers and sellers in the process of completing a sale. Closing costs is an umbrella term covering a wide range of fees and documents, including: loan origination fees, title searches, appraisal fees, title insurance, taxes, deed recording fees, credit report charges, surveys, title insurance, and credit report charges.

In some instances, gifts of equity (property sales to friends and relatives at below-market prices) can also incur some closing costs. These costs are due at the closing of the sale. They must be disclosed to both the buyers and sellers and fully agreed upon before the sale can be completed. These costs occur when you transfer the title to your house to the buyer. Therefore, the total amount of closing costs varies by location and value of the property.

Generally, a homebuyer is supposed to pay between two and five percent of the property’s purchase price in closing costs. A recent survey conducted by ClosingCorp revealed that the current nationwide average closing costs for a single-family house are $6,087, including taxes, and $3,470, excluding taxes. Under the federal Real Estate Settlement Procedures Act (RESPA), lenders must provide a disclosure statement outlining all closing fees. However, the fees aren’t necessarily equal to the closing costs provided by the lender in their loan estimates.

All closing costs must be itemized on the loan estimate and disclosure. The listed fees can include items such as the application fee, attorney fee, closing fee, credit report fee, FHA mortgage insurance premium, flood determination and monitoring fee, homeowner association transfer fee, and homeowner’s insurance, among others.

Who Pays Closing Costs In California?

The short answer to this question is that it depends on the agreement between you and the buyer. Nevertheless, some closing costs are traditionally paid by the buyer, whereas others will be paid by the seller. In simplified terms, a buyer is supposed to pay most of the mortgage-related fees, including the origination and escrow fees. A seller, on the other hand, should pay the property transfer taxes associated with the sale.

But it gets a bit intricate when you go beyond the basic items. For instance, the property’s title insurance fee can be paid by the seller or the buyer, depending on local laws or customs. In Southern California, it’s more common for sellers to bear the title insurance fees, while in Northern California, buyers typically cover it. It is also common for the two parties to share this cost in certain counties within the state.

Although California has specific rules about mortgage and home purchase fees, they don’t dictate who covers which closing cost. That is left to the sellers and buyers to decide amongst themselves. We make this process as easy as possible for San Diego home sellers, guaranteeing to cover all closing costs related with the sale of your home. 

Closing Costs For Buyers In California

Homebuyers in California should be prepared to incur two types of closing costs: one-time (non-recurring) and prorated or ongoing (recurring) costs. As mentioned earlier, the average closing costs for buyers range between three to five percent. This means that if you are buying a home for $800,000, your non-recurring and recurring closing costs will range between $16,000 to $24,000.

Non-recurring fees include:

●  Down payment (a percentage of the home’s purchase price, depending on mortgage program requirements)

●  Escrow Fees

●  Title Insurance – a search of the title is critical to ensure the title doesn’t have any encumbrances. The resultant insurance policy is covered by the buyer/borrower and protects the lender in case of unexpected issues with the title.

●  Notary – the cost of verifying signatures

●  Recording – fee for recording the change of ownership with the county government

Recurring fees include:

●  Prepaid mortgage interest – pays the interest quota of the monthly mortgage payment for the current month

●  Property taxes – normally, six months of taxes will be held in an impound account

●  Hazard insurance – homeowner insurance premium

●  HOA dues – these should be enough to cover the first two months

Closing Costs For Sellers In California

In California, home sellers should expect to pay closing costs that range between five and nine percent. Here are some of the closing costs for sellers:

●  Broker’s commission – this is the fee charged by the listing broker for marketing your property

●  Title insurance – assures the buyer that they’ll take possession of real property that is unencumbered by title defects like prior liens

●  Documentary transfer tax – it is a governmental tax on the transfer of real property, over and above any lien, also referred to as a real estate transfer tax in other states

●  Seller concessions – any fees the seller agrees to pay on behalf of the buyer, such as prorated property taxes, mortgage discount points, or a home warranty

●  Escrow – pays for escrow services and other incidentals like document preparation

●  Attorney fee – paid to the attorney that represents the seller, if applicable

While all this may sound like a lot, just remember, other people have gone through the process before you. But if you want to sell your home in San Diego, you can easily avoid these closing costs by selling it directly to us, Trusted House Buyers. We are committed to helping homeowners get rid of their distressed homes in a fast, honest, and stress-free way.

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