A common perk or negotiating tool used in real estate is the “no closing cost” offer.  Closing technically occurs after the title has been conveyed to the buyer and the contract is executed.   In reality there are always closing costs it’s just the seller is agreeing to pay for them as part of the offer.  Knowing the real costs to closing will help you be a better negotiator and understand the total package expense to purchasing the real estate.  Here are a few of the closing costs that happen at the end of the sale:

·       Recording Fees – the cost of the government to record the change of ownership

·       Appraisal Fees – The cost of the bank’s verification that your property is worth loaning on.

·       Home Owner Fees – Some communities charge fees to keep the community up to snuff.

·       Survey Fees – To validate the property boundaries.

·       Application Fees – For mortgages, permits, etc.

·       Title Search Fees

·       Broker Commission – The cost of using the real estate agents

·       Home Warranties – Protects against major damage and appliance failure

·       Points or Fees – Simply prepaid interest which can be negotiated with the seller to roll into the mortgage.

The important part to remember is the price of the real estate is the total of fees and asking price.  Many people ignore the fees when deciding if their home is going to be a good purchase.  You need to sit down and do the math on what the house is worth in total.  Then calculate the asking price of the house, closing costs, and any work you will have to do to the house to make it acceptable.  Only then you begin negotiating.

Often the sell will offer no closing cost, but they’ve increase the price of the home but an equivalent or greater amount.  This is primarily geared for people with no money so they are able to roll their closing costs into their mortgage.  People who are poor with money will always feel this is a great idea so they can spend their money on more fun things now.  People who are talented with their money will calculate the cost with paying the closing costs now versus rolling their closing fees into the mortgage and using the money for other investments or debts.   They then determine which option is most advantageous to them over the long haul.

Closing costs should never be hidden.  The federal law requires that all closing costs are recorded on a standard HUD-1 form.  Any fees that don’t get recorded on this form are likely a scam from the seller or real estate agent attempting to make a little extra money.

Your real estate agent or real estate attorney should be able to determine if the fees being requested are reasonable for the size and time of your transaction.  If you question your real estate agent’s motives then pay for a second opinion.  Your home is most peoples’ largest business deal, it’s worth a little more counsel.