Closing costs on a property vary with each individual transaction. What may be needed on one you may not need on another. A breakdown of each cost and credit is placed on a closing statement so the buyer and seller can see what they are paying for, and where the price of the property is coming from. Once everything is placed on the closing statement, both buyer and seller have the opportunity to view it and make sure it is all correct. When they have agreed that all figures are correct they sign it and a check is cut to the seller for the proceeds, if there are any.
Calculate the seller's closing costs. The seller commonly pays the commission to the Real Estate Broker. This is in the form of a percentage of the sale. This is usually the largest cost the seller has. Take the sale price and multiply it by the percentage and you will have this figure. The seller also pays a fee to use the Title Agency for closing the transaction. This fee will vary among agencies. It is negotiable as to who will pay for the Title Insurance, what is customary in one state could be the opposite in another. There will be a tax adjustment from the time of settlement to the time the taxes are due. If the seller has already paid taxes for the period the closing takes place, they will get a credit. If taxes are owed in the period the seller will be charged until the day of closing. The day of closing usually is charged to the buyer. You may also have adjustments for special assessments going to the property, such as a road or water and sewer lines going in. If your property is located in a subdivision that has a home owners association, there may be fees owed to them. If there are any outstanding judgments or liens against the property, you will have to pay them out of your proceeds at closing. Add all these figures up and subtract for your proceeds and you should have a good estimate of what you will receive at closing.
Calculate the buyer's closing costs. Typically buyers pay cash for lots. If you are doing any financing on the lot, you will need to check with the mortgage company to get a list of their fees. You will also have an escrow for future tax payments. You will pay the interest payment from the day of closing until the day of your first payment. This will depend on your interest rate and how many days you will be using the money. The buyer will also pay a fee to use the Title Agency for closing and may pay for the Title Insurance depending on your agreement with the seller. If financing you will be required to have a survey. If the seller has had a recent survey done, with no changes to the property since, than you can have that one re-certified into your name and save some money. If not, you will have to have a new one done. Prices for surveys vary from area to area. Even if you are not required to have a survey, you should have one done anyway. You will need it to put up a fence or build a house or shed. The buyer also pays a tax adjustment from the day of closing until the next tax bill is due. If the property is located in subdivision that has a home owners association you will have to pay that until the next payment is due. Special assessments, like that of the seller will be due. Add these figures to the price of the property and subtract any financing and you will have a good estimate of how much to bring to closing. Most Title Agencies require certified funds, so make sure you get a more exact figure from the Title Agency and get your funds ahead of time.
Ask your title clerk for a copy of the settlement sheet ahead of time. Closing costs can change for many reasons, such as, the sellers can give the buyers a credit to help with closing costs, the day of settlement may change, which changes all the adjustments. You can have a pretty good idea of what they are going to be, but you will need a final figure from the title clerk for an exact amount. Every settlement is different but you will know what is going on with yours. If you chose to use a lawyer, or had some engineering done on the lot. Almost anything can be paid on the settlement sheet or paid outside of settlement, so just keep track of what's been done and you'll be able to figure your closing costs.