Fees, Charges and Other Expenses
By John McCarthy
Congratulations! Welcome to the world of real estate. Regardless if you are a buyer or seller you will be faced with fees before or at the closing (and sometimes after the closing). You have made an offer and it has been accepted by the seller or you have got your home under agreement. Either way there are costs associated with your new home sale or purchase that you may or may not be aware of. Here is what the buyers are up against first then the sellers.
Mortgage, Taxes & Homeowners Insurance: While I wouldn’t call of these “fees” you may not be aware for example that your mortgage is paid in arrears. Your bank or mortgage company usually requires that you pay a few months of taxes and homeowners insurance in advance into an escrow account. You may or may not be able to get the escrow waived depending on which bank or mortgage company you use.
Title Examination or Search: A title company hired by the closing attorney, who represents the bank or mortgage company, will search the title on the property you are buying. They are looking for any “clouds” or “liens”, including mortgages or anything that is irregular and prevents you from getting clear title. For example, there may be an Order of Conditions on the property that hasn’t been cleared up if there is conservation land on or near your future home. This fee can be inexpensive ($100-$200) or can skyrocket if more work needs to be done to obtain a Certificate of Compliance from the Conservation Commission. Please note that it’s the sellers responsibility to provide clear title but the buyers bank or mortgage company will charge you Mr. or Ms. Buyer to be sure it is cleared up properly.
Purchase and Sale: Many times the closing attorney will be the buyer’s attorney up until the closing. He/she may have offered advice and guidance, reviewed both the contract to purchase and the purchase and sale for you. This is typically where they would bill you for these services.
Appraisal Fee: The bank or mortgage companies will send out an appraiser to the property to determine value. This fee can run from $300 and up. The new rules with the Home Valuation Code of Conduct that began on May 1st has increased these fees.
Municipal Lien Certificate (MLC): This is given by the town saying that the taxes have been paid. Cost is typically $25, with an additional $65 going to the Registry of Deeds to record this fact.
Plot Plan: The bank or mortgage company requires that a plot plan which shows that all “improvements” (house, driveway, shed, etc.) are on the property being purchased. Cost is $150-$200.
FHA Commitment Fee: Many of the loans recently are FHA backed. They charge a “commitment” fee which is approximately $250.
Flood Certification: A small fee to determine whether or not your property is in a flood zone and would therefore need flood insurance.
Loan Origination Fee: Commonly referred to as “points” with each point equal to 1% of your loan amount. In some instances you may choose to pay the bank or mortgage company a point or points to reduce your mortgage rate. For example, if your loan amount is $300,000 and your interest rate at 5.5% you may have an option of paying a point or points to bring the rate down to say 5%.
Recording Fees: If you are getting a mortgage you will need to record it at the registry of deeds at a cost of $175. You will also need to record your new deed at $125.
Owners Title Insurance: The bank or mortgage company requires Title Insurance to cover the mortgage amount and charges the buyer for this. In addition, the buyer has the option to purchase Title Insurance for the equity (difference between purchase price and loan amount) in the property. Most buyers purchase this as it is a onetime fee and protects their interest in the property.
Condo Fee Adjustment: If you are buying a condo you will owe the seller for condo fees. For example, if you buy on the 15th of the month and your condo fees are $300/month you are required to credit the seller 15 days at $10/day.
Fuel Adjustment: If you are buying a house that has oil heat for example you will need to reimburse the seller for the amount of oil left in the tank.
Loan Processing or Loan Origination Fee: A fee charged by the lender for accepting the loan and doing all the work necessary to approve it.
Credit Report, Quality Control and Administration Fees: Small fees that can really frustrate a buyer. Make sure that they were disclosed to you ahead of time.
Commission: This fee is paid to the real estate office and is only charged when the house is sold.
State Tax/Stamps: The state of Massachusetts taxes sellers at a rate of $4.56 per thousand dollars sold. For example, if you sell your home for $400,000 you are required to pay the state $1,824.00. To my knowledge there is no getting around this fee.
Mortgage Payoff: If you have a mortgage on your property you will need to have that paid off before you can close or give the buyer “clear title”. The closing attorney will take care of this by communicating with your mortgage company prior to the closing to find out how much you owe and where to send the payment.
Real Estate Taxes: Taxes are prorated as of the closing date so whatever taxes you owe or are due back to you are reflected on the HUD.
Recording Fees: The state will charge a fee to the seller to record the release of the mortgage on the property they are selling. Currently, the fee is $75 and is reflected on the HUD.
Discharge Fee: The seller, if they have a mortgage, will be charged a fee by the closing attorney to do the work to discharge the mortgage. This fee typically ranges from $75-$100.
Overnight Fee: This fee is charged by the closing attorney and is usually between $15 and $40. If the seller has a mortgage on the property the closing attorney will send the money from the proceeds of the sale to the seller’s bank or Mortgage Company along with the appropriate paperwork. The closing attorney will then get a “release” and record this document at the local Registry of Deeds.
Deed Preparation: The closing attorney or the seller’s attorney will charge the seller $100-$200 to prepare a new deed. The preparation of the new deed is the sellers responsibility.
Attorney’s Fees: The attorney that is handling the closing for the bank or mortgage company can charge a seller for work done to clear the title. This is fairly unusual as their fee comes from the buyer but on occasion if the seller has had to have title work done on the property for instance and doesn’t use their own attorney, there may be a charge.
Final Water/Sewer and Electric: If you in a town with a municipal water or electric service you are required to pay off your water and electric bill by closing. This is due to the fact that these town utilities form liens on the property and must be paid to provide clear title for the buyer. The closing attorney will check to make sure it is paid or, more likely have the REALTOR® get final readings and put it on the HUD as a charge to the seller.
6D Recording Fee (condos only): The 6D is a document produced by the management company of a condo complex ensuring that the seller was current on their condo fees. A fee of $75 is charged to the seller of a condo.
Condo Fee Adjustment: If you are selling a condo you can be reimbursed for condo fees. For example, if you sell on the 15th of the month and your condo fees are $300/month you are entitled to 15 days at $10/day.
There may be others that I have overlooked but I believe this is most if not all of them. It is always a good idea to ask your REALTOR® to give you a rundown of what fees to expect to avoid any surprises. In the real estate world surprises are definitely not a good thing.
If you have any questions about these real estate terms, or are looking to buy or sell a home please contact me, John McCarthy at Rowley Realty, 165 Main St., Rowley, MA 01969, Phone: 978 948-2758, Cell 978 835-2573 or via email at email@example.com.