Whether you’re buying or selling, getting ready to close on a home is an exciting time, and that means it’s easy to lose focus on what things will ultimately cost. Let’s take some time to demystify the financial impact of closing by going over how much closing costs are for buyers and sellers in New Jersey:
The General Rule of Thumb
If you’re buying or selling a home, you should plan for your closing costs to equal about 3% to 6% of the sale price of the home.
For those of you in the seat of the buyer, you have an added benefit in that your mortgage lender will be scrutinizing your financial situation in order to ensure they see a healthy return if they choose to approve your home loan. The lender will be sure to go over all of the details of anticipated closing costs in order to secure both of your financial futures.
On the other hand, home sellers are likely to have more coverage of their closing costs since they should be seeing a reasonable return on the time, effort, and money they have invested into their property over the years.
Out of all of the individual closing costs, real estate agent commissions tend to be near the top of the list.
Some buyers and sellers feel they could accomplish the job of an agent without that additional expense, but oftentimes the agent is doing a lot of heavy lifting that goes totally unnoticed by their client. Agents make sure paperwork is filed appropriately while catering to the needs of their clients. Their years of experience ease the pressure on buyers and sellers throughout the negotiation process, and the agent does everything to keep a deal moving forward as long as their client wants to do so.
We recommend that you shop around for your agent by meeting with at least three and asking them any questions you may have at the time. Get a sense of how they operate and gauge your comfortability with each of them before signing any contracts.
Finally, agent commission is not set in stone, and you may discover that an agent is willing to negotiate their commission with you. So, don’t settle for just anyone to represent you when buying or selling property – find the professional that is out to make the entire transaction a success.
Some states and municipalities have laws that require an attorney to oversee the transfer of ownership of any property, or they could even require both buyer and seller to have legal representation.
If this is not a legal stipulation where you live, it can’t hurt to have an attorney specializing in practicing real estate law to have a hand in the closing of the transaction. Often, the buyer’s lender will retain the services of a local attorney to watch over the transfer of ownership.
If your case is an FSBO owner selling directly to a buyer who is not using either an agent or lender, both the buyer and seller could agree to hire an attorney in order to provide legal protections for everyone.
On top of the major portions of your closing costs that we have already covered, you will see all kinds of extra fees that can vary wildly depending on the location of the property.
Some of these could include prorated property taxes, title transfer, title insurance, underwriting fee, recording fees to update public records, and appraisal fees. These do add up quickly, but they aren’t going to be the bulk of where your money is going at closing.
It may seem important to understand each and every one of these, and you should have the opportunity to have any and all of your closing costs broken down and explained to you by your mortgage lender or real estate agent.