Understanding What Closing Costs Mean To The Home BuyerPosted by Paula Smith Re/Max First St George on Wednesday, March 30th, 2011 at 11:10pm.
Anyone considering buying a home in St George will need to understand closing costs. Closing costs are often overlooked, it is important that the buyer understand all of the costs involved in purchasing a home in St George or Hurricane areas. These costs go beyond the purchase price. Inspections, lender fees, appraisals, surveys, and other due diligence requirements.... the terminology used in real estate can be extremely confusing for first time home buyers and to those who may not have purchased in many years. What's more, realizing who pays for these things can be even harder to figure out.
What Are Closing Costs?
Real estate agents, title company officers, and mortgage providers deal with real estate transactions on a daily basis, so they understand this language. When it comes to what is known as the 'closing costs' it becomes even harder to understand for the average home buyer. Because closing costs can be, and often are, negotiated between buyer and seller, there are no clear-cut answers, and different states often have different guidelines. Let's start by taking a look at the closing costs that can appear in your closing document:
- Upfront, prepaid, interest points
- Appraisal costs
- Title transfer costs
- Realtor fees
- Loan origination fees
- Property taxes
- Homeowner’s insurance
- HOA transfer fees/dues
The above examples of closing costs are simply the extenuating costs of purchasing a home. But, they can't just appear out of nowhere when it comes time to write the check. That's where the 'HUD' comes in.
What Is a HUD Statement?
All closing costs must be disclosed on a form called the HUD-1 Settlement Statement, which offers a breakdown (line by line) of each cost. The HUD-1 must be signed by all parties in the transaction before it is legally considered complete. The loan officer for the buyer and the buyer’s agent will review the HUD-1 with the buyer so that there are no surprises when it comes to signing it at the closing table.
Included in the HUD-1 Settlement Statement are also any credits due to the buyer, such as the down payment amount, tax credit from the seller (for the time the buyer did NOT occupy the property), buyer closing costs that the seller has negotiated to pay, as well as any money held in escrow on behalf of the buyer, such as the earnest money deposit.
This is a long, long list of money in and money out. Many of the terms may be confusing to you, the buyer. Your agent should explain, in detail, each and every item and provide supporting documentation to help you understand. A good realtor and loan officer will provide a true copy of the estimated HUD-1 prior to your closing. You may even want to obtain a blank HUD-1 form to read through just so you are prepared to ask questions before the figures get filled in.
What Is A Due Diligence Period?
In St George, home buyers are given a “Due Diligence” period for which they are allowed to perform any test to the property in which they have an accepted offer. These tests will usually start with a Home Inspection (done by a professional home inspector). The inspector may recommend further testing by other professionals should they discover an issue (such as a leak in the roof). Larger parcels of land may require a survey to determine the exact property line. All due diligence tests paid for by the buyer. Should a problem be discovered, the agent may then step in to renegotiate the deal asking for credits or repairs. Of course, the seller is NOT obligated to correct anything; however, the buyer is not obligated to purchase the home either. This protection period was created for Utah home buyers through a pre-determined period, allowing them to research the property to their satisfaction with the ability to cancel the contract with no risk of losing their earnest money.
Closing costs are often said by home buyers to be the most confusing part of the entire home buying process; even more confusing than inspections, offers, and contracts. These costs deserve individual attention from both you and your buyer's agent. Be sure to insist on being fully informed as to the detail of each cost. After all, you are footing the bill for this large investment of a home and you deserve to know everything that involves your money.
Paula Smith Re/Max First St George, Buyers Agent Specialist
If you are considering purchasing a new home in St George or surrounding area and you are not yet committed to a Buyer’s Agent Specialist, consider contacting Paula Smith. Paula Smith of Re/Max First in St George is a Buyer’s Agent Specialist. Find all MLS listed property at www.StGeorgeUTproperty.com and allow Paula Smith to negotiate the best possible deal on your behalf.
Thank you for reading, if you want other reports, just ask! Paula Smith Re/Max First Realty www.StGeorgeUTproperty.com
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