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Typical closing costs in sales of Florida real estate:

There are other costs associated with the purchase of a home or property besides its price.  Closing costs are a point of negotiation between the buyer and seller and disagreements about who should pay what can sometimes make or break a deal.  Although the seller will be expected to pay the brokerage sales commission through his or her listing contract with a real estate office, and the buyer will be expected to pay his or her own loan escrow items and pre-paid interest on a loan,  most other closing costs are negotiable.  In some cases, such as with a VA loan, the buyer is not allowed to pay certain closing costs, such as the documentary stamp tax on the deed or underwriting fees.  To help prepare you in the best way possible for your next sale or purchase, I have prepared the following information about closing costs, including explanations and cost guidelines. 

Title Insurance - Protects you from claims against your right to own the property in "peaceful enjoyment".  The safety of your investment is largely dependent upon the soundness of the title to the property you purchase.  An undiscovered title defect in the history of the chain of ownership could encumber the property at a later time, causing the owner to lose all or a portion of the property or by making it impossible to re-sell to a buyer demanding clear title (which most do).  Title insurance cannot eliminate title defects that may surface later but it assures you of the best possible legal defense if your title is attacked and reimburses you up to the face amount of the policy if the title, or any part of it, should fail.   Title insurance is based on the purchase price of the property. If there is a loan involved there will be a title insurance policy covering the lender for the amount of the borrowed funds, and another policy issued covering the new owner of the property up to the full purchase price.  In this case, since only one title search needs to be done, title companies give a simultaneous issue rate which is substantially less than if either policy was purchased separately.   In a cash sale, there would be only an owner's policy.  Title insurance can be paid by either the buyer or the seller and is often split between the two, as it is usually one of the largest expenses of closing a sale.   For example, on the sale of a house priced at $250,000, title insurance, including closing fees, search and exam would probably cost around $1800 for both owner and lender policies.  On a cash sale, the owner's policy for the same amount might be around $200 less.

Documentary stamp tax on the deed - Typically, but not necessarily, a seller cost.  It is a Florida tax on the sale of real estate and is based on the purchase price.  The rate is $.70 per one hundred dollars or fraction thereof.  For example, on the $250,000 sale just discussed, the tax would be $1750.

Documentary stamp tax on the mortgage - A Florida tax on new and assumed mortgages, based on the amount.  The rate is $.35 per one hundred dollars, or fraction thereof.   Let's assume in the example above that the buyer got a conventional loan and put down 20% as a down payment.  The documentary stamp tax on the loan of $200,000 would be $700.

Intangible tax on the note - This is a tax charged on all new loans.  The rate is $.20 per one hundred dollars.  The $200,000 loan would also be taxed an intangible tax of $400.

Lender fees - these can vary widely, depending on the lender.  Some lenders offer a lower interest rate but charge more up front fees at closing.  There are usually options to pay an origination fee (usually 1% of the loan) or points (also 1% of the loan, per point) to lower the interest rate but with today's low interest rates, it is often not as appealing to do so.  Typical lender fees include an underwriting fee, tax service fee and application fee, although there may be others.  Excluding any origination fees or points, these charges can cost anywhere from about four to six hundred dollars, which is typical, to well over a thousand.   Don't be afraid to ask questions about these fees before you agree to the loan.  After you have made application, your loan officer will provide you with a good faith estimate of your closing costs. 

VA Funding fee - for buyers who qualify for and choose to get a VA loan, a funding fee applies, which can be rolled into the loan.  VA buyers can borrow 100% of the property value and roll the funding fee into the loan, or pay the fee at closing.  The norm is 2.2% of the loan for first time users, 3.3% thereafter.  Discounts on these fees may apply for some veterans. 

Survey - This is nearly always required if there is a loan and is a good idea to do anyway.  A current survey will show any easements or encroachments on the property you are buying, such as neighboring fences, drainage easements, utility easements, etc.  It will also reveal if the property you are purchasing has encroachments to setback lines, has a fence on the neighbor's land or something similar.  Typical surveys for lot and block subdivisions cost between $375-450, although large, complex or waterfront properties are usually considerably more. 

Appraisal - This is required by the lender to determine that the money they are lending is being used for a property that is worth what the buyer is paying for it.  An appraisal usually costs at least $400.  Large or complex properties are often higher. 

Recording fees - Recording a deed costs about $25.  Recording a mortgage can be $275 or more. 

Pest Inspection - This is for Wood Destroying Organisms (called a WDO inspection) and must be done within 30 days of closing a sale on a home.  It includes searching for wood rot and fungal decay in addition to termites.  If dry rot or fungal decay is found (common in Florida), the wood must be replaced with clean wood in the areas of decay, and a re-inspection done.  If found, live termites must be exterminated and a re-inspection done.  Many homeowners carry a transferable termite bond protection plan.  A WDO inspection can usually be done for around $100, including one re-inspection, although it is occasionally higher.

Septic System Inspection - This is actually a drainfield inspection and is required for all homes over 5 years old that use septic tanks for waste water disposal.  It costs about $200.  If the tank must be pumped, there is an additional charge, but this is not common on homes less than 10 years old.

Home Inspection - This is paid for by the buyer.  It allows the buyer to have a qualified home inspector thoroughly check all aspects of a home he or she has contracted to purchase, and often reveals problems requiring attention that may not have been apparent.  I highly recommend home inspections, particularly for resale homes.  Inspections on small homes usually start at around $250 and go up from there. 

Stucco Inspection - This is important for homes of stucco, or partial stucco, construction.  In particular, synthetic stuccos have had problems if not applied properly.  Synthetic stucco placed too close to the ground acts as a wick to pull moisture up into it, creating an ideal environment for termites.   This can also happen if the stucco is exposed to excessive moisture frequently, such as a sprinkler head spraying a portion of the house.  If you buy a stucco home, be sure to have it inspected by an inspector who is well-versed in all forms of stucco and has the equipment to take moisture readings from the walls.  Traditional, or true stucco, homes usually do not have the same kinds of problems. 

Homeowner's Warranty - Particularly on older homes, buyers are often more comfortable having a home warranty in the event the air conditioner, or some other major appliance, fails.  Home warranties cost around $400 (more for homes with swimming pools) and cover major appliances, hot water heaters, air conditioning units, etc., for one year from the time of closing.  There is usually a service charge to honor claims that may be made.   A home warranty can be purchased by the buyer or provided for the buyer by the seller. 

Credit report - About $50 or $60, this fee is paid for by the buyer at the time of loan application.

Overnight delivery charges - These are fees charged by a title company to send out closing packages overnight for parties who cannot appear in person for closing or to overnight a loan pay-off resulting from a closing.  Closing documents are dated and time is of the essence.   Loan interest,  property tax pro-rations and homeowner association dues pro-rations are based on the closing date.  Overnight delivery charges are usually paid for by the party served by them, and can cost as little as $40 to more than $100.  $60-80 is common, but packages sent out of the country are usually higher. 

Feasibility study - This usually applies to vacant land or commercial property, and may include a septic tank perk test as well as a wetlands evaluation.  It is usually paid for by the buyer.  Perk tests cost about $200.  Wetlands evaluations, depending upon the depth of the investigation, usually start at $225 for residential lots, but may cost considerably more if a full jurisdictional delineation is done.  If a full jurisdictional delineation is done with the intention of proceeding with the purchase, it is wise to also have a survey done outlining any wetland areas.  Commercial properties are usually evaluated to determine if the property is suitable for its intended commercial use, and this type of feasibility study is paid for the the Buyer.

Brokerage Fees - Also called a sales commission, this fee is agreed upon between the seller and the sales associate representing the brokerage at the time the property is listed. 

Escrow Items - These are sums of money held in an escrow account by a lender to pay for property taxes and insurance in the event a borrower is late on payments or defaults on the loan.  These costs belong to the buyer, as does pre-paid interest.  Pre-paid interest is the amount of money charged per day from the time of closing until the beginning of the first full payment period.  Although pre-paid interest is paid in advance, regularly monthly payments pay interest in arrears, so a closing on July 15 would charge the borrower 17 days of interest at closing, with the first full payment due September 1.

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