The Seller’s Hidden Expense: Unveiling Closing Costs For Seller In California

Regardless of your location, navigating the financial intricacies of real estate transactions is challenging. Both homebuyers and sellers must consider factors beyond the purchase price of the home: closing costs for seller in california encompass the fees and taxes necessary for completing a real estate transaction. While sellers often bear the brunt of these expenses, buyers should also be ready to handle a portion of the closing costs.

In California, known for its high cost of living, closing costs are no small matter. Residents of the Golden State face the fourth highest closing costs in the United States, as reported by data from CoreLogic’s ClosingCorp. If you’re looking to enter the real estate market in California, it’s important to be informed about the closing costs you may incur.

How much are closing costs in California?

Closing costs can significantly differ from one state to another. In California, excluding Realtor’s fees, these expenses typically represent about 1 percent of a home’s sale price, according to ClosingCorp. With the state’s median home sale price reaching a substantial $735,480 in February 2023, as reported by the California Association of Realtors, the median closing costs stand at approximately $7,355.

Included in these costs are various fees such as title insurance fees, recording fees, transfer taxes, and mortgage origination fees. However, the total amount paid in closing costs can vary greatly depending on the specific location of the property within California. For example, in the high-cost San Francisco Bay Area, where the median sale price is $1.05 million, closing costs would amount to around $10,500. Conversely, in the Central Valley area, home to the state capital of Sacramento, the median home sale price is more modest at $449,000, resulting in closing costs of about $4,490.

Unveiling Closing Costs For Seller In California

Who pays closing costs in California, buyers or sellers?

In California, both buyers and sellers are responsible for covering closing costs, though not in equal amounts—sellers generally pay a larger portion. Here’s an overview of the typical expenses each party can expect to pay, including legal fees if a real estate attorney is involved.

Closing Costs for Buyers:

  • Origination Fee: This fee is charged by lenders for setting up your loan. It’s important to compare this cost as it can vary significantly between lenders.
  • Application Fee: Some lenders may charge a fee, often several hundred dollars, to process your mortgage application.
  • Credit Fee: A small fee, usually around $25, is charged for the credit check during the application process.
  • Mortgage Points: Buyers may choose to pay for points to reduce their mortgage’s interest rate, which can be beneficial but increases closing costs.
  • Appraisal Fee: Lenders require an appraisal to verify the home’s value, typically costing between $300 and $400.
  • Home Inspection Fee: A professional inspection to identify any major issues with the property will likely cost another $300 to $400.
  • Title Fees: These cover a title search to ensure no liens or encumbrances and title insurance to protect against future claims.
  • Property Taxes: Buyers may need to prepay property taxes for six months to a year.

Closing Costs for Sellers:

  • Commission Fees: The largest expense, realtor commissions, are about 5 percent to 6 percent of the home’s sale price. For a median-priced home in California, this could exceed $44,000.
  • Transfer Tax: This tax is for transferring property ownership, around 0.11 percent of the sale price in California.
  • Title Insurance: Protects against title issues, with costs ranging from a few hundred to around $1,000.
  • Property Taxes: Sellers may need to settle any due property taxes, with the amount varying based on the home’s location and the closing date.
  • Homeowners Association Fees: Sellers in an HOA may need to pay prorated fees.
  • Wire Transfer Fees: Banks may charge a fee for transferring funds to pay off the mortgage.
  • Recording Fees: Local governments charge a fee to record the sale, typically a few hundred dollars in California.

Understanding these costs is crucial for both buyers and sellers in the California real estate market.

Lowering your closing costs in California

In the realm of real estate transactions, there’s room to negotiate closing costs, potentially reducing your financial burden. For those purchasing a home in California, your leverage in negotiating these costs with the seller might vary based on market dynamics. A high demand from buyers could limit your negotiating power, whereas a property that has lingered on the market may provide you with more room to negotiate.

Buyers have additional avenues to reduce closing costs. It’s worth exploring eligibility for government-sponsored programs. Federal, state, and even county initiatives are often in place to assist with closing costs, particularly for first-time homebuyers.

Furthermore, mortgage lenders may offer rebate programs that can shave a few hundred dollars off your loan closing costs. In California, Realtors might also contribute towards closing costs through credits from their sales commission. It’s advisable to inquire with your agent about such opportunities.

Sellers should remember that the commission fees paid to agents are typically open for negotiation. Especially for higher-priced homes, securing even a slight reduction in commission rates can lead to substantial savings.

Find a local real estate agent

Whether you’re stepping into the market as a buyer or a seller, having a seasoned professional to guide you through the real estate process can make a significant difference. To find the right agent, a great starting point is to seek recommendations from friends and family who have had satisfying experiences with their Realtors. Additionally, it’s wise to review the agent’s online presence, paying close attention to feedback from their past clients. Beyond digital research, don’t underestimate the value of direct observation—take a stroll or drive through your target neighborhoods and take note of the names on “for sale” or “sold” signs, particularly those attached to properties that catch your eye or resemble your own. This hands-on approach can help you identify an agent with a strong track record in your area of interest.

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Marc Afzal- Real Estate Investor

Marc Afzal is a full time Real Estate Investor and has well over 21+ years in the Real Estate Industry. Marc is a Licensed Broker, NMLS licensed Loan Officer. Marc is currently married to his wife Sheila and they live in Napa California. Marc is enthusiastic about Sports, Golf, Real Estate Investing, Family and Travel.

About Marc Afzal

Marc Afzal is a full time Real Estate Investor and has well over 21+ years in the Real Estate Industry. Marc is a Licensed Broker, NMLS licensed Loan Officer. Marc is currently married to his wife Sheila and they live in Napa California. Marc is enthusiastic about Sports, Golf, Real Estate Investing, Family and Travel.

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