Shopper Newspaper Column 5-9-18:
Question: I'm getting ready to enter the market to buy a home. I've heard about so many different terms lately my head is spinning! What do "closing costs" mean and who pays them?
Answer: Imagine that you're buying a $3 million yacht. You go to the yacht store, find one you like and then get in line at the check-out counter to pay your bill (remember, this is a fantasy, we're imagining here). The clerk rings up your tab and then adds $200,000 for the sales tax, shipping and handling.
The extra costs at the check-out counter above the purchase price are, essentially, closing costs. The situation at the yacht store is similar in real estate. In addition to the actual cost of the property, say $300,000, there are also taxes, lending costs, insurance, appraisals, legal fees, etc. that are collected at closing.
Who pays closing costs is often a matter of local tradition or, what the form says. However, forms can be amended and local traditions are not binding. The real way it works is this: Unless otherwise required by law, all closing costs are negotiable. In a strong sellers' market you can bet that the buyer will pay many if not all closing costs. In a strong buyers' market, the owner will likely offer a "seller's contribution" to off-set the purchaser's closing expenses.
The important point is that closing costs are typically negotiable. For specifics, speak with your real estate broker.
