Closing Costs 101 for Buyers

Are you planning to purchase a new home on Oahu? Are you curious about what your closing costs might be? In addition to saving money for your down payments, buyers should also anticipate being prepared to pay for closing costs as well.

Majority of a buyer’s closing costs will be due upon closing, which means no upfront money is required from the buyer until the day of signing. These include items such as:

  • Down Payment: Your down payment will typically vary from anywhere between 3%, 5%, 10%, or 20% down. If you are completing an all-cash purchase, the total will be due at closing via a cashier’s check or wire transfer to the escrow company.
  • Title insurance: This is a cost that is split between both buyer and seller – 60% to the seller and 40% to the buyer. Title insurance protects against any liens, claims, or errors that are filed against the property title.
  • Escrow fees: These are fees that are paid to the title company.
  • Recording Fees: These are transfer fees that get paid to the state. If you are purchasing in an association, they may have their own transfer fees as well.
  • Lender Fees: Each lender will have their own processing and lender fees that get paid to the lending company. If you are buying points to offset the interest rate, this will also be another expense to consider.

On the other hand, some buyer expenses will be due upfront. This can include the following:

  • Home Inspection: It is recommended that a buyer’s home inspection be conducted by a professional home inspector at the buyer’s expense. The cost for the home inspection is usually based on the size of the property.
  • Appraisal Fee: If you are purchasing the property with a mortgage, the financing will always be subject to an appraisal. Most lenders will require the appraisal fee to be paid for upfront. The appraisal will usually be ordered after passing your home inspection contingency.
  • Credit Check: Some lenders will also require your credit report fee to be paid for upfront. The higher your credit score is, the better interest rate and financing terms you will receive!

Other expenses are typically not paid by the buyer. Instead, these items are typically at the seller’s expense. However, in certain cases, some exceptions could be made. These items can include:

  • Real Estate Commissions: In most cases, your real estate agent’s services as a buyer’s agent come at no cost to the buyer. Instead, your agent only gets compensated after successfully closing on your property purchase. However, in rare cases, some sellers may refuse to pay a commission to the cooperating real estate agent. In cases like this, your agent’s commission will need to be paid by you. Discuss with your real estate agent on a fair compensation in exchange for their services.
  • Termite Report: The termite inspection is typically paid for by the seller in most real estate transactions. In some cases, the seller may ask the buyer to pay for their own termite inspection. Or, in multiple offer situations, the agent may recommend that the buyers pay for their own inspection, in order to make their purchase offer more appealing to the sellers. Regardless, it is absolutely recommended to pay for a termite inspection, whether it be at the buyer’s or seller’s expense.
  • Survey Report: If you are purchasing a single family home, the seller is often required to pay for a survey to be done to the property. In some cases, the seller may not want to pay for the survey and may ask the buyer to pay for it at their own expense. The seller may have also done a survey in the past and may ask the buyers to accept the previous survey report, especially if no boundary modifications were made since then.
  • Condo or Association Documents: If you are purchasing a condominium or townhome or will be a part of a community association, the seller is often required to provide condo and association documents at their expense. In some cases, the seller ask the buyer to provide at their expense instead. Similar to the termite inspection, agents may also suggest the buyers to offer to pay for these in multiple offer situations as a way to strengthen their purchase offer.
  • Move-Out Cleaning: If a property is tenant or owner occupied, it is normal to expect professional move-out cleaning to be conducted at the seller’s expense. However, if a property has been cleaned prior to coming on the market or is currently vacant, some sellers may ask for this to be waived.

Each buyer transaction is unique and depending on your situation, other fees could be involved. If you are considering buying a home on Oahu, contact me today for a consultation!

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