The Costs Of Buying Or Selling

There are many cost associated with buying or selling a home that many people are not fully aware of until they actually go through the closing process. The purchase price of a house is only part of the total cost associated with a closing — here's a list of associated fees that you should be aware of ahead of time.

Buyers Costs:

 Land Transfer Tax or Property Purchase Tax: This is calculated as a percentage of the purchase price. The formula varies, depending on the location of the property.

Adjustment Costs: These are any costs pre-paid by the seller and are reimbursed when the buyer takes possession of the home. Included in the cost — though not the only possibilities — are property taxes and pre-paid water, gas, and hydro charges. Home heating oil can sometimes be negotiated. Note: Utility meters are usually read the day of the closing. 

Mortgage Cost: Some home loan companies may charge a fee to set up a loan. Verify all charges if any with your home loan carrier.

Home Insurance: All home loan companies will require you to carry an insurance policy. This cost can vary depending on your coverage and the insurance company you insure with. Contact your insurance carrier or check out this list of local insurance services. 

Legal Fees: For detailed information of legal costs, contact your attorney. 

Title Insurance: A policy covering the title transfer is highly recommended to protect yourself against any deficiency in the title prior to the transfer of ownership. Home loan companies will require Title Insurance when taking out a mortgage. The fee is usually $2.50 per $1,000 for lender's coverage and $3.50 per $1,000 for owner's coverage. 

Title Search: This is a review of all public records to determine the current state of ownership. The cost can range from $75 to $150 or more.

Home Inspection: This cost will vary dramatically depending on the location, size, and age of the house. Cost will range anywhere from $300 to $500.

Appraisals: Lenders will require an appraisal of the house before securing a loan. Appraisal cost can average anywhere from $275 to $350 for a single-family dwelling.

Seller Cost:

Realtor's Commission: The Seller usually pays all the cost of the commission paid to the seller's broker/agent, and included in that fee is the commission paid to the buyer's broker/agent. Commissions can range anywhere from 4 to 6 percent of the purchase price of the home. 

Mortgage Discharge Fees: If you have an existing loan and sell your home before the loan matures, or if you sell your home and switch to another bank, there may be penalties and discharge fees associated with paying the outstanding balance. Refer to your fees listed on the original home loan contract and verify all charges with your attorney.

Legal Fees: The seller will need an attorney to discharge the title and the mortgage. Other expenses may also apply, so verify all charges with your attorney.

Smoke Certificate: Under Rhode Island General Law 44-30-71.3, sellers are required to have smoke detectors in the dwelling, and must present a smoke detector certificate at or before the closing. This is usually paid by the seller, unless negotiated otherwise. The cost is usually around $30. 

Other Notes:

•  At the end of a closing, the Real Estate Settlement Procedures Act (RESPA) requires that you be presented with a Uniform Settlement Statement (HUD-1) which itemizes all charges to be paid by the borrower and seller in connection with settlement. 

• Some of the cost that I have mentioned above may or may not apply to your particular closing and/or circumstances. The costs may vary, and may be negotiated between the buyer and seller. There may also be additional cost associated with your closing that have not been mentioned above. 

• A real estate broker/agent should NEVER give you any type of legal advice. You should always consult with an attorney who can advise you on the legal issuse and the total cost that will apply to your particular case when buying or selling a home. 

• To participate in a free Home Buyer Education Class offered by Rhode Island Housing and its partners contact them at 401-457-1234 or http://www.rhodeislandhousing.org/sp.cfm?pageid=501

Rhonda Sasa is a Johnston resident, member of our Mom's Council, and a licensed REALTOR® with Exit Realty The New Generation. Reach her via e-mail at rhonda@exitgeneration.com