In Minnesota Real Estate Transactions one of the most common questions asked by buyers and by sellers is, "What are closing costs?" and "who pays the closing costs?"
When you buy a home in Minnesota some of the expenses involved are the closing costs. Closing costs for buyers can include appraisal fees, credit report fees, loan origination fees, loan discount points, title insurance fees, lender insurance fees, PMI insurance, Pre-paid interest, escrow accounts, mortgage recording fees, and a real estate administrative fee. The closings costs typically range from between 2-4% of the purchase price, but there are several factors that influence this. Some buyers will ask the sellers to pay for their closing costs and a lot of sellers will agree to pay up to 3% of the purchase price towards the buyer's closing costs. The key thing for a buyer to understand is that by asking the sellers to pay their closing costs they are actually increasing the purchase price and their mortgage amount. If a seller gets an offer for $400,000 and agrees to pay $10,000 towards the buyers closing costs it is essentially the same thing to them if they were to get an offer for $390,000 without agreeing to pay a portion of the buyers closing costs.
Seller closing costs are always paid by the seller and are taken out of the proceeds from the sale. The realtor fees and brokerage commission is the largest of the fees, but aren't usually referred to as closing costs. Then there is the state deed tax, the mortgage recording fee, the settlement fee, the abstract or Title search, the lot location report, special assessment search, and the name search. For homes near the average sale price in the Twin Cities, the seller's closing costs tend to be around .5% of the purchase price.
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