In this three-part series, the Property Sisters help you better understand real estate contracts.
Processes & Costs Behind the Scenes
Many items agreed in the contract are handled by agents, title company and attorneys, without need to trouble seller and buyer. There are typical and reasonable costs associated with these requirements.
Surveys: For a single family home, a survey is typically required. Average costs are $475 to $875 depending on lot size, wooded areas, fence lines, etc. The survey shows buyer any violations of building lines, easements, etc. If the survey shows encroachments, the parties work together to a resolution.
Title Insurance: We want property with a clear title. Title insurance ensures no clouds on title, such as an old mortgage or lien. Seller pays a large portion of title insurance. If the buyer has a lender, lender requires additional title insurance.
Flood & Homeowner Insurance: Title Company will search whether property is in a flood plain and if flood insurance is required. Flood plain determination is important given recent extreme weather events. All lenders require homeowner’s insurance.
Tax Credits: Seller is responsible for property tax up until closing. In Cook and other counties, tax bills are paid a year in arrears. Because sellers have paid their last tax bill, they’re often surprised they have to give buyer a credit for a bill not yet issued.
This credit is an art, not a science! We use last full year tax year bill to calculate. Buyer may get a cushion of 5-10% for the possibility of an increased tax bill. We’d like property taxes fully resolved at closing, without need to revisit when actual tax bills are issued.
Transfer Tax: Many cities have a transfer tax when buying or selling, from $5 per $1,000+. Buyer and seller may both pay part of the tax, but in general, it’s Seller’s cost. There is also a state and county transfer tax.
Many of us have sat through closings, not really understanding these services and costs. The next time you buy or sell, your transaction costs will make so much more sense.
Join us next month for Part III, as we review the final items associated with closing.
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Look for The Property Sisters monthly segment in PPL, or contact:
Bridget Gricus (708) 814-6253, bridgetgricus@gmail.com
Eileen Kerlin Walsh (708) 448-5169, Eileen@KerlinWalshLaw.com
