Real estate fees and taxes
Nowhere to run nowhere to hide. No matter where in the world you’re buying real estate, you’re going to get hit with fees, taxes and most of it will not make much sense. But it’s the price we pay for the privilege of becoming homeowners.
Closing costs vary widely depending on the state you live in, the day of the month you close and the lender you choose. But some of the fees that you can count on are paying mortgage lender fees, appraisal fees, recording fees, title search and title insurance, survey costs and possibly attorney fees. Real estate commissions are the responsibility of the seller, unless you’re using a buyer’s broker.
When you apply for a mortgage, lenders are required by federal law to provide within three days of the loan application a written good faith estimate outlining estimated fees for the loan. The lender’s fees are firm, but the fees for appraisals, surveys, inspections and title services are estimates, and final fees should come in within about 10 percent of the estimates. In addition, if you are placing a mortgage on the property, you will be required by the lender to purchase title insurance, which will guarantee that the title to the property is free and clear based on a full search of the title records.
Not all lenders are created equal, and not all lenders charge the same fees. Origination fees vary among lenders, and comparison shopping could result in lower fees. Lenders may also offer lower origination fees for their customers based on length of time banking with them and deposit amount.
And the age old question about when to hire an attorney and when not to is usually decided by a combination of regional culture and the purchaser’s comfort zone. For example, the real estate culture in many parts of the Northeast, especially near the major cities, is primarily to hire an attorney as opposed to most of Florida, where the real estate agents and title companies handle the sale.
In fact, it is almost impossible to purchase real estate any other way in an attorney area. Attorneys draw up the contracts, negotiate with each other regarding the terms of the sale and go to the closing. Most real estate agents in these regions never touch a contract once they brought the buyer and seller together. Again attorney’s fees vary and should be something clear from the outset of the transaction.
If you’re lucky enough to be purchasing a high end home, you may be required to pay a Mansion Tax depending on where you live, which may turn out to be the biggest big ticket item on your closing costs list. The so called Mansion Tax is a tax levied on property transfers that are sold over a certain price point. For example, in the state of New York, the tax is 1 percent of sales at or over $1 million. Just think about how many $999,999 sales are booked. The tax is generally paid by the seller, if not the buyer is responsible. Either way, the state of New York gets their money. In addition, New York is considering raising this tax and also instituting a new tax on second homes. The Mansion Tax is also applicable in San Francisco and Los Angeles, as well as many international cities like London, Singapore and Hong Kong, but thankfully, not in Florida so far.
When purchasing real estate, trying to hide from the fees is impossible. What is possible is educating yourself so when you see that good faith estimate you don’t run away.