Who Pays for What in a California Real Estate Transaction?

Who Pays for What in a California Real Estate Transaction?

Navigating the financial aspects of a real estate transaction can be complex, especially when it comes to determining who pays for what. In California, both buyers and sellers have specific responsibilities when it comes to closing costs and other expenses. Here’s a breakdown of what each party typically covers in a real estate transaction in California.

Buyer’s Costs

1. Loan Fees

Origination Fees: Charged by the lender for processing the loan.

Credit Report Fees: Fees for obtaining your credit report.

Discount Points: Optional fees to lower your mortgage interest rate.

2. Appraisal Fees - The cost of having the property appraised to determine its market value.

3. Home Inspection Fees - Fees for inspecting the property to identify any issues or necessary repairs.

4. Title Insurance - Lender’s Policy: Protects the lender’s interest in the property.

Owner’s Policy: Optional but recommended to protect the buyer’s interest.

5. Escrow Fees - Fees paid to the escrow company for managing the closing process.

6. Recording Fees - Fees for recording the deed and mortgage documents with the county.

7. Homeowners Insurance - A year’s worth of homeowners insurance is typically required at closing.

8. Property Taxes - Prorated property taxes for the remainder of the tax year.

9. Miscellaneous Fees

HOA Fees: Prorated fees if the property is part of a homeowners association.

Courier Fees: Fees for delivering documents.

Seller’s Costs

1. Real Estate Commission - Typically 5-6% of the sale price, split between the buyer’s and seller’s agents.

2. Transfer Taxes - Taxes levied by the city or county for transferring the property title.

3. Title Insurance

Owner’s Policy: Protects the buyer’s interest and is usually paid by the seller in California.

4. Escrow Fees - Shared with the buyer, but sellers typically cover a significant portion.

5. Prorated Property Taxes - Property taxes up to the date of sale.

6. Home Warranty - Optional, but sometimes offered as a seller concession to the buyer.

7. Repairs and Credits - Costs for any repairs agreed upon during negotiations or credits given to the buyer in lieu of repairs.

8. Mortgage Payoff - Payoff amount for any existing mortgage on the property.

9. Notary Fees - Fees for notarizing documents required for closing.

Shared Costs

1. Escrow Fees - Typically split between the buyer and seller.

2. Title Insurance - While the owner’s policy is usually paid by the seller, the cost of the lender’s policy is covered by the buyer.

Conclusion

Understanding who pays for what in a real estate transaction can help both buyers and sellers prepare for the financial aspects of closing a deal. By being aware of these typical costs and negotiating them during the transaction, you can ensure a smoother and more transparent process. If you have any specific questions or need detailed advice, feel free to reach out. I’m here to help you navigate every step of your real estate journey. --- If you have further questions or need personalized advice, don't hesitate to contact me. I’m here to support you throughout your real estate transaction.