Who Pays for What in Real Estate Transactions? A Guide for Buyers and Sellers

One of the most common questions clients ask when entering a real estate transaction is, “Who pays for what?” Understanding the financial responsibilities of buyers and sellers can be crucial in navigating the complexities of a real estate deal. This simple breakdown will help clarify these responsibilities so that you can feel more confident as you approach your next home sale or purchase.

Seller Responsibilities

As a seller, several costs are typically associated with the sale of your property. Here’s a list of the most common expenses you can expect to pay:

1. Document Transfer Tax
   Depending on your location, you may need to pay taxes related to the transfer of property ownership.
2. City Transfer or Conveyance Taxes
   These are additional taxes that some municipalities impose when property changes hands.
3. Termite Inspection and Work
   A termite inspection is often required, and if issues are found, repairs (Section 1 work) are generally the seller’s responsibility. This cost is negotiable, however.
4. Home Warranty
   Sellers may offer a home warranty as a form of insurance for buyers, covering repairs for appliances and systems. This is also negotiable.
5. HOA Document and Transfer Fees
   If your property is part of a homeowners association, you may need to cover the costs associated with transferring ownership documents.
6. Notary Fees and Escrow Fees
   These fees are incurred during the closing process and are typically the seller’s responsibility.
7. Title Insurance Premium – Owner’s Policy
   This protects the seller against any title issues that may arise post-sale.

Overall, these costs generally amount to about 7-10% of the sale price, depending on local regulations. While this may sound intimidating, it’s essential to remember that when you purchased your home, the seller paid for similar expenses.

Buyer Responsibilities

On the flip side, buyers also have their share of financial obligations. Here’s what you can typically expect to pay when purchasing a home:

1. Title Insurance Premium – Lender’s Policy
   Buyers usually need to pay for this type of title insurance to protect the lender against any title issues.
2. Notary Fees and Escrow Fees
   Like sellers, buyers are responsible for these fees during the closing process.
3. Lender Document Preparation Fees
   If applicable, these fees cover the preparation of necessary loan documents.
4. Recording Changes for All Documents in Buyer’s Name
   There may be fees associated with recording the change of ownership.
5. Tax Proration
   Buyers will be responsible for property tax proration from the date of acquisition.
6. Loan Origination Fees
   Depending on your lender, you may incur fees for processing your loan application.
7. Interest on New Loan
   Interest on the new loan will be owed from the date of funding until the first payment is due, usually about 30 days later.
8. Home Inspection
   While not a requirement, a home inspection is highly recommended to identify any potential issues with the property.
9. Homeowner’s Insurance Policy
   Buyers are required to obtain insurance for the property to protect against potential damages.

The costs associated with buying a home can vary significantly based on the type and amount of your home loan. It’s crucial to work closely with your lender and real estate professional to get a clear picture of what to expect.

Clarity is Key

Understanding who pays for what in a real estate transaction can help alleviate some of the stress associated with buying or selling a home. By being aware of these financial responsibilities, both buyers and sellers can better prepare themselves for the costs involved in their respective transactions. If you have any questions or need assistance estimating these costs, don’t hesitate to reach out to a real estate professional who can guide you through the process. Knowledge is power, and being informed is the first step toward a successful transaction!

If you’re considering a move or investment and require a trusted Real Estate Broker, we’re here to assist you. Contact us via email at TEAM@McDanielCallahan.com, complete the form below, or give us a call at 925-838-4300. We are ready to provide expert guidance and support for all your real estate needs. Terry McDaniel DRE License #00941526