Home Buyers and Seller Closing Costs – 2022 Report
For some people, “closing costs” is a vague term attached to selling or buying a home. Many aren’t clear about who pays what. Educating yourself on this part of the home selling/buying process is essential for a successful and surprise-free transaction.
Closing costs vary from state to state. Also, because they’re based on the cost of the home in question, closing costs in the Portland metro area will be higher than other parts of Oregon due to higher home prices in the area. Keep in mind that some of these fees are payable to the lender and others to third parties, like home appraisers and title agencies.
We want to dispel some of the mystery and confusion around what seems a necessary evil for anyone wanting to buy or sell a home, so we’re breaking down all the pieces of the puzzle here, specific to Oregon.
First, let’s look at what costs belong to the seller.
What Closing Costs Does the Seller Pay?
Title Insurance—Title insurance is protection for both the seller and the lender should title complications or disputes arise during or after the sale. Basically, it prevents the loss of equity or interest. Learn more about the seller’s title insurance responsibilities here.
Half of Escrow—It’s a general consensus in Oregon that sellers and buyers split escrow costs down the middle. The basic formula to calculate escrow (always subject to change) is: Escrow Fee = $1 per $1000 plus $1200 split 50/50 between buyer and seller. Learn more about escrow here.
Lien Fee—There are different types of liens on a home, a mortgage being one of them. It’s the seller’s responsibility to have liens removed from the home they’re selling. If a seller has a first and second mortgage on their home, that’s two liens. If they have an additional home equity line on their home, that’s a third lien. In a case like this, the seller would pay $200 per lien, for a total of $600. This ensures that the buyer can get a clean title and deed when it all transfers over.
Local Government Fee—Right now the typical fee for this is $25 per tax lot.
Buyer’s and Seller’s Agent—Why would a seller pay commission to both? Read our article on this very subject to find out. This cost could be anywhere from $1 to over $10,000. It depends solely on what the buyer and seller negotiate on the home sales contract.
Washington County Pays Extra—Sorry folks. If you sell in Washington County, you’ll also pay an additional “transfer tax,” which is calculated at $1 per $1000 of the sale price, split 50/50 between the seller and the buyer.
Can Elect to Pay Buyer’s Closing Costs—Sometimes sellers elect to pay the buyer’s closing costs up front, which allows the buyer to make a higher offer. The costs get folded into the loan amount. Essentially, the seller still pays them, but the amount is spread out over the length of the mortgage. This is not common during a hot seller’s real estate market, but is common in a buyer’s market.
Here’s an example of seller closing costs.
|$500,000 Home Example||Seller Pays|
|Half of Escrow||$850|
|To close out one lien (mortgage)||$200|
|To record one tax lot as sold||$25|
|If they live in Washington County||$250|
Seller’s closing costs usually come out of the equity on the home they are selling, not directly out of their pocket.
What Closing Costs Does the Buyer Pay?
So, if the seller pays for all of the above, what can you, as a buyer, expect to pay when you buy your next home?
Credit Check—This covers the cost of the lender checking your credit. This is usually around $30.
Origination Fee—This covers the lender’s administrative costs to initiate your loan and is often 1% of the total mortgage.
Title Search and Insurance—Wait a minute. Didn’t we just say that the seller pays the title insurance? Yes, that’s right and it protects the seller. As we also say, the lender requires title insurance to protect their interests in the property. This responsibility falls in the lap of the buyer and is usually about 1% of the total mortgage. Learn more about the buyer’s title insurance responsibilities.
Escrow—The purpose of escrow is to ensure that: 1) to protect the buyer’s money, their earnest money deposit and their downpayment funds and ensure they go to the correct party at the right time, and 2) determine the homeowner’s balance to make sure everything is paid out and prorated at closing: homeowner’s insurance, possible HOA fees, mortgage payoffs, property taxes, and more.
Recording Fee—This fee is charged by a local government agency for registering the purchase or sale of a piece of real estate.
Washington County Transfer Tax—See above seller’s closing cost example as this is split with the seller 50/50.
Optional / Occasional Fees
- Attorney’s fees—This is optional in Oregon and Washington. But if you’re buying a home with unusual circumstances or a complicated sale, you might want to invest in a real estate attorney.
- Discount points—Sometimes buyers have enough cash on hand to buy down points on a home to reduce the interest rate.
- Home appraisal fees—While these fees are almost always paid by the buyer, they’re not always paid at closing. Typically they’re paid for when services are rendered, before closing.
- Home inspection fees—This is typically always paid upfront by the home buyer and can run $200 to $2000 or more depending on the type and number of tests ordered.
- Homeowner’s insurance—This insurance is required by your lender (usually enough to cover one year), sometimes before closing and sometimes at closing.
- Underwriting fees—This fee covers the task of creating the loan. Sometimes it’s included in the origination fee.
When all is said and done, you can expect to pay somewhere between 5% to 7% of the cost of your new home at closing.
Get Closing Cost Estimates Today
To get a better idea on this and all closing costs on any home you might be interested in buying or selling, you can use Fidelity National Title’s handy closing cost estimator.
Are Closing Costs Negotiable?
The short answer is “yes.” Negotiations are usually done between the buyer, seller, and lender. When it comes to government and third-party fees, negotiation becomes more difficult, if not near impossible.
Reasons for a buyer wanting to negotiate closing costs can vary, but often, this can occur after the inspection is complete and the buyer is aware of needed repairs and improvements—usually big-ticket items like plumbing and foundation issues.
So, what costs and fees can you negotiate before closing on your new home?
Homeowner’s Insurance—While paying this insurance isn’t negotiable, the amount could be. Rather than accept the homeowners insurance policy the lender picks, you can shop around to see if you can find a better price.
Discount Points—Mentioned above. Determine the options with your lender.
Origination Fee—Some lenders will reduce or remove this fee altogether. You never know until you ask.
Underwriting Fee—As indicated above, sometimes this fee is included with the origination fee. If your lender presents it as a separate fee, as with the origination fee, you can always ask for them to waive it.
Real Estate Commissions—Typically, the seller pays the commission for both the buyer’s and seller’s agents from the proceeds of the sale. This means typically it is the seller that negotiates real estate commissions (which are always negotiable).
Title Insurance—There is no getting around title insurance that we are aware of and the fees seem to be relatively the same across the board. However, it never hurts to ask.
How Can I Find a Good Title Company?
Ask us! We work with title experts across Oregon and Washington, and can help you find the title company that best meets your needs. Contact our top 1% seller’s agents (503-714-1111) or our top 1% buyer’s agents (503-773-0000) today or talk with the chatbot on our website. We’re happy to help.February 14, 2022