Real Estate Closing Costs in Florida
Most parties to a real estate closing have at least a basic understanding of the purpose of the closing process. They understand that the closing process entails a closing agent coordinating all parties in efforts to execute all required document, exchange funds and pay out amounts upon which the closing is contingent and, finally, record the transfer deed (usually a Warranty Deed) and mortgage, if the purchase was financed.
An introduction to Real Estate Closing Costs in the State of Florida
The closing process, of course, takes place after a complete title, lien and permit search and analysis is completed on the property and several other milestones are met in accordance with the purchase agreement entered into by the buyer and seller.
In fact, the purchase agreement is the foundation of any closing and guides the agent’s timeline and responsibilities, such as making sure the correct party is charged for title insurance, attorney’s fees, credits, etc.
It’s these fees and costs, which are usually listed in the purchase contract, that most parties to a purchase agreement have little understanding.
Accrued closing costs are associated with every step of the closing process.
For example, if the purchase is financed, as most are, the buyer must pay the fees and costs associated with obtaining such loan, including origination fees, loan insurance, credit check fees, etc.
These amounts are in addition to the required down payment, or the amount of the purchase price not financed by the lender (i.e. Conventional loans typically allow for only 80% of the purchase price being financed while the buyer must present the remaining 20%), and are paid during the closing process by the title agent.
Additionally, closing costs also accrue from the work conducted by the title agent and include title, lien and permit search fees, survey fees, insurance premium fees, etc.
Understanding how closing costs breakdown
While closing costs may vary depending on geographic area within the state of Florida, on average, a buyer can expect to pay up to 5% of the purchase price of the property in additional closing costs.
However, with the usual exception of the lender’s closing costs, all such costs may be negotiated between the parties.
This is due to the fact that Florida does not enforce any law mandating one party to pay closing costs on residential purchase agreements.
In fact, oftentimes, credits between the parties are agreed to as a manner in which to negotiate who pays for which fees. And although closing costs are usually split between each party in Florida, one party may agree to pay all accrued closing costs to incentivize the other party.
This is often seen with purchase agreements in which the seller is a developer and has already existing relationships with the title agent, surveyor and other third parties to whom fees and costs may be owed.
In cases in which parties are splitting the closing costs, many parties go into the closing process without fully understanding what they owe and why.
The following is a list of estimated fees and costs encountered by a buyer and seller in the average home purchase in South Florida. It’s worth noting, however, while this information provides a well-rounded list, it does not represent every possible fee or cost that may be charged to either party in any given closing.
Closing Costs customarily charged to the Seller
- Recording fees for the Deed: counties typically charge $10.00 to record the first page and $8.50 for each page thereafter.
- Documentary Stamps for the Deed: this cost represents the tax charged by the particular county for having transferred the title to the property. It is dependent on the purchase price and calculated at a rate of $.70 for every $100 of the price.
- Settlement Fee: this represents the fee charged by the title agent for document preparation and general handling of the file. On average, title agents charge from $650 for this service
- Municipal Lien and Permit Search: this fee varies from region to region and depends heavily on the timeline in which the results are needed. Certain counties offer rushed services at a premium. Non-rushed services can range from $200 to $500.
- Title Search: as the basis upon which the title insurance policy is issued, this search is very important to the success of the closing. It usually costs between $150 to $250.
- Realtor Commissions: sellers are typically responsible for paying the realtors’ commissions from the proceeds of the sale. If the parties are represented by individual realtors, then on average each professional is entitled to 3% of the purchase price, bringing the total to 6%. This, of course, is a negotiable term.
- Realtor Brokerage fees for seller’s realtor: each party is responsible for their own realtor’s brokerage or transaction fee, which may range from $195 to $500 on average.
- Mortgage or Lien payoffs: as a condition for closing and the issuance of the title insurance, the seller would be required to pay off any pending mortgage(s) and liens attached to the property.
- County Property taxes: in Florida, county property taxes are paid in arrears starting on November 1 through March 31. So, depending on the timing of the sale, the taxes may or may not have already been paid by the seller. If so, then the seller will be credited for the time in which the buyer would have possession of the property for the remainder of the year. If not, then usually the title agent will apportion this cost to the seller and provide a credit from the buyer.
Closing Costs customarily charged to the Buyer
- Recording fees for the Mortgage: as with the deed, the charge is usually $10.00 to record the first page and $8.50 for each page thereafter.
- Documentary Stamps for the Mortgage: similarly to the deed, this cost represents the tax charged by the particular county for having obtained a mortgage on the property. It is dependent on the purchase price and calculated at a rate of $.35 for every $100 of the price.
- Settlement Fee: again, this represents the fee charged by the title agent for document preparation and general handling of the file. On average, title agents charge from $650 for this service.
- Mortgage fees: these fees vary from lender to lender and represent the “cost” of obtaining the loan. It involves the lender’s origination or transaction fees and reimbursements for credit checks etc. Often times, the amount is contingent on the amount of the loan.
- Homeowner’s Insurance Premium: while recommended for every homeowner, this insurance is a prerequisite to obtaining financing. Typically, lenders require the usual homeowner’s policy along with wind or flood insurance for those areas in which they are needed.
- Property Survey: both the lender and the title agent will require a survey of the property to be conducted. Fees may range from $250 to $500+ depending on the size and use of the property.
- Appraisal Fee: to be assured that a reasonable amount is being loaned and the lender’s investment is secured, they almost always require an appraisal conducted on the property by a certified appraiser. These appraisals may cost anywhere from $350 to $500.
- Property Inspector Fees: An inspection is one of the first items paid for by the buyer after entering into the purchase agreement. It allows the buyers to make an educated decision about staying in the contract given the physical condition of the property. Similarly, it is used by the Lender to ensure their investment is feasible. The cost varies depending on the types of inspections conducted and can cost between $400 to $700.
While the fees listed above are customarily attributed to either party as a practical matter based on need of the service, the title insurance premiums are usually paid for by the party as determined in the purchase agreement and can be a negotiated term (although each county does indicate who is responsible for its payment if the contract is silent on the matter).
These premiums include an Owner’s Title Insurance Policy, a Lender’s Title Insurance Policy for financed loans and Endorsements for each.
The cost for the Owner’s policy is determined by the purchase price and the cost of the Lender’s policy is determined by the loan amount.
For more information on the calculation of title insurance and who is technically responsible for its payment, see our article entitled A Title Insurance Primer.
All costs, fees, payoffs or other amounts due by either the buyer or the seller must be fully and completed disclosed in a settlement or closing statement which is provided to each party well in advance of the scheduled closing.
Relatively recent federal rules mandate that a Closing Disclosure statement must be provided to all financed buyers 3 days prior to the scheduled closing by the lender.
The Closing Disclosure statement, or CD as it’s commonly referred to, must be used in all financed purchases while the traditional HUD-1 statement may be used with cash purchases.
These disclosure forms are in addition to the already mandated Truth-in-Lending and Good Faith requirements.
While these statements are standardized throughout the industry nationwide, these forms may be rather convoluted and confusing to the average buyer. As such, it is imperative that buyer and sellers alike consult their title agent and/or real estate attorneys for a thorough explanation of amounts disclosed.
Often times, title agents and attorneys will freely assist buyers and sellers with the review and explanation of their closing disclosure statement.
Further, several agents, including ASR Law Firm, will provide estimated quotes free of charge to prospective sellers and buyers so they are able to make an educated decision regarding costs and fees associated with the particular closing.
Every party to a closing should not only make sure they are thoroughly familiar with this information prior to the closing process itself, but also ensure that those they have hired to assist with the process are prepared and willing to provide the required explanations.
Have questions about the closing process, title insurance or any other component of your real estate closing?
Contact us directly at ASR Law Firm for answers to your questions or to obtain a free estimated quote for title insurance and associated charges for your Florida real estate closing.