ABA Family Legal Guide

Buying and Selling a Home

The Steps of Buying and Selling a Home

The Closing

What are some financial aspects of the closing?

At the time of closing, the seller and the buyer will total up various credits in order to determine how much money the buyer must pay. The allocation of such expenses will depend on the terms of the purchase contract as well as the law and customs in the area where the property is located. The real estate agent or lawyer should advise the buyer before closing how much money will be needed at the time of closing. Typically, the buyer will be required to have a certified or cashier's check or wired funds in the amount required to meet these expenses.

The seller will usually receive credits for such items as fuel on hand (such as oil in the home heating tank), unused insurance premiums (if insurance is being assigned), prepaid taxes, and public utility charges such as water and sewer fees. These credits will also include any other items prepaid by the seller that will benefit the buyer.

The buyer will usually receive credits for such items as the earnest money deposited and taxes or special assessments that the seller has not paid but which, when they become due, will include the period that the seller owned the property. The settlement sheet will also specify who is responsible for the payment of various expenses. These will include the sales commissions and the costs of the title search, inspections, recording fees, transaction taxes, and the like.

The list of fees presented below by no means exhausts the types of fees that might be charged at closing. Other common fees include a loan origination fee to cover the lender's administrative costs in processing the loan; a credit report fee; a lender's appraisal fee; a mortgage insurance application fee; a mortgage insurance premium; the lender's lawyer's fees; and hazard insurance premium. The buyer may also have to put money into escrow with his or her lender to assure future payment of such recurring items as real estate taxes and insurance. This can, when added to the adjustments due to the seller, add up to a surprisingly large total. Also, there are often separate lender document fees that cover the preparation of final legal papers, such as the promissory note and mortgage or deed of trust.