Closing Costs

[JerseyJeff 0]

I am a newbie to RE, and have never owned a house, or tried to purchase one so forgive me if this question seems elementary.

 

Is there anything more to closing costs than just that they are the costs involved to close a sale of a house?

 

Is the seller responsible for closing costs?

 

I have read one of our selling points to the homeowner is no closing costs. How do we do that? Is it covered in the margin we create?

 

Just trying to educate myself so I am prepared if/when the homeowner mentions closing costs, which I'm sure they will if this is a selling point.

 

Thanks for the help.

 

JerseyJeff

[-Tony- 0]

JerseyJeff,

 

in your contract you with the t/b you specify they pay closing

 

Tony

[MichaelC 160]

JJ, closing costs are a negotiable point in any real estate deal. In a traditional sale, closing costs are usually predetermined to some extent. In varies from area to area, but certain costs are attributed to the seller, while others are attributed to the purchaser.

What we try and do to make a lease purchase deal appeal to the homeowner is accept full responsibility for all allowable closing costs.

Not to worry, though. We then pass along all these costs to the tenant/buyer.

[JerseyJeff 0]

We then pass along all these costs to the tenant/buyer.

Do we just tell the T/b, you're responsible for all closing costs, and that's that? (In a nicer way of course)

Or do we use the money from our margin to pay for them?

 

JerseyJeff

[MichaelC 160]

In our typical sandwich lease deal, the agreement between you and the tenant/buyer states that the purchaser is responsible for all closing costs. Almost without exception this is accepted and the papers are signed and approved.

And, if not? No biggie. All things are negotiable. If the deal hinges on me accepting a share of the closing costs, I'll accept it if the deal is an overall winner for me.

[JerseyJeff 0]

Who do the closing costs go to? In other words, who get's paid?

 

JerseyJeff

[MichaelC 160]

Closing costs are the miscellaneous expenses involved in the transfer of real estate from one owner to another. They are paid when the buyer and the seller meet to exchange the necessary papers for the house to be legally transferred. On the average, closing costs run approximately 2% to 3% of the house price. This percentage may vary, depending on where you live, and are usually comprised of, but not limited to, the following:

 

Attorney's or escrow fees (yours and your lender's, if applicable)

Property taxes (to cover tax period to date)

Interest (paid from date of closing to 30 days before first monthly payment)

Loan origination fee (covers lender's administrative costs)

Recording and survey fees

First premium of mortgage insurance (if applicable)

Title insurance (yours and your lender's)

Loan discount points

First payment to escrow account for future real estate taxes and insurance

Paid receipt for homeowner's insurance

Any documentation preparation fees

 

The sales agreement states who will pay which costs.

[JerseyJeff 0]

Yikes...

 

Should I have a good understanding of all of those costs?

 

If we set up a co-op lease, we are basically the middle-person, so the closing costs, etc. will be between the seller, and the T/b, correct?

 

Is it different for a sandwich lease?

 

What is our involvement as far as closing costs are concerned?

 

JerseyJeff

[MichaelC 160]

Yikes...

 

Should I have a good understanding of all of those costs?

Not immediately, but eventually you'll need to know where your money is going. No need to fret over this stuff now, JJ.

 

If we set up a co-op lease, we are basically the middle-person, so the closing costs, etc. will be between the seller, and the T/b, correct?

With a cooperative assignment, you are putting the deal together and being paid for your specialized knowledge. You are out of the loop once you complete the deal between the homeowner and the tenant/buyer. Usually, it is set up, again, so the tenant/buyer will pay all allowable closing costs.

 

Is it different for a sandwich lease?

Is what different?

 

What is our involvement as far as closing costs are concerned?

Well, they need to be addressed to some extent when you are putting the deal together. Leaving certain critical terms blank on a contract is a sure way to get in trouble. And most people would consider closing costs to be important. But, with a lease purchase deal, they are of no concern to us today because the transfer of title isn't taking place if and until the option to purchase is exercised. And that may not happen for at least a year from the start of the agreement.

[JerseyJeff 0]

Well, they need to be addressed to some extent when you are putting the deal together.

Do we have to list each cost separately, or can we just say all closing costs?

 

JerseyJeff

[MichaelC 160]

No need to get specific. Keep it general.