Closing costs are an essential part of the real estate process. These costs pay for a variety of things that would cause the real estate process to stall without them. Depending on your home’s value, closing costs can add up and make buying a home or refinancing not worth it. This article discusses closing costs and gives you an idea of how much closing costs are for sellers in 2023.
What do closing costs cover?
Closing costs cover a wide range of services involved when buying or selling a home. These expenses are required to complete the sale of the home, and there is no way around paying closing costs. However, things like a seller’s assist and financing your closing costs into your loan amount as a buyer is possible so you don’t have to pay the full amount of closing costs.
Closing costs generally cover the same things in a real estate transaction. For example, most closing costs cover origination fees from the lender, appraisals, home inspections, taxes, deed recording fees, title insurance, and credit report charges. Closing costs are required to be displayed in the Loan Estimate and Closing Disclosure that is issued by your lender. The Loan Estimate breaks down your closing costs and gives you an accurate estimate of what you should expect to pay at closing. Since some closing costs can change, the Closing Disclosure gives you an updated list of your closing costs and highlights any major changes from the Loan Estimate.
How much are closing costs?
While the amount of closing costs you pay depends on a number of different factors, borrowers should expect to pay about 3 to 5 percent of the selling price as their closing costs. The average amount of closing costs paid by borrowers in 2020 totaled about $6,000 including taxes. Areas with the highest amount of closing costs in the United States are Washington D.C. and Delaware. The sellers closing costs involve the mortgage left on the home, attorney fees, transfer tax and incidentals.
What is a seller assist?
A seller assist (also known as a selling concession) is money paid by the seller to help finance the closing costs for the buyer. The seller assist is most often limited to up to 3 percent of the home’s purchase price, meaning the maximum seller assist on a $600,000 home is $18,000.
The reason that sellers offer a seller’s assist is to ensure the buyer can afford the home and close the deal when they dont have enough funds for closing costs or they want to buy down their interest rate.. For homes that only have a few offers, offering a seller’s assist can be the difference between selling your home and having it stay on the market for longer than it already has.
While seller assistance can be a great option for buyers, there are some other considerations you should make before using a seller assist when closing on your next home. First, there are some tax implications with a seller’s assist. The seller’s assist is seen as income and is subject to income tax. Additionally, a seller’s assist isn’t really the seller paying the buyers’ closing costs. The seller’s assist is in exchange for a higher sales price and the seller makes the same amount of money if they decide to pay your closing costs.