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One of the most significant costs associated with buying or selling a property is the closing costs. In this blog post, I explain what they are, and examples of what you can expect to pay when buying or selling a property in Colorado.
What are Closing Costs?
When closing a real estate deal, buyers and sellers must pay the expenses associated with the transaction, known as closing costs. Closing costs cover services and expenses linked to the deal, and are paid at the time of closing. The average cost can vary depending on the location, the type of property, and the financing options.
Average Closing Costs In Colorado
The average cost in Colorado is approximately 2% to 3% of the purchase price of the property! It is important to note that this is only an estimate and that individual fees and costs can vary significantly from one transaction to another, as well as between different lenders.
Examples of Closing Costs in Colorado
- Title Fees: These fees are associated with transferring the ownership of the property to the new owner. Title fees can include a title search fee, title insurance, and other fees associated with transferring the title.
- Lender Fees: These fees are associated with obtaining financing for the property. Lender fees can include an origination fee, discount points, appraisal fee, and credit report fee.
- Home Inspection Fees: Home inspections fees cover a professional inspection of the property to spot potential issues. Costs range from $300 to $500 depending on the property’s size and location.
- Property Taxes: Colorado homeowners pay property taxes in arrears, which means they pay taxes for the year AFTER they are assessed annually. So when closing on a real estate transaction, the seller will owe the buyer a prorated amount.
- Escrow Fees: A third-party escrow company receives and holds the buyer’s funds until the transaction is completed, and they charge for their services. This can include earnest money, property taxes, homeowners insurance premiums, and/or mortgage insurance. The funds are typically released at the closing table.
- Recording Fees: In order to document the transaction with the county clerks office, you must pay a recording fee.
- Prepaid Expenses: These are items that have already been paid in advance. Such as homeowner association fees, prepaid insurance premiums, and prepaid property taxes.
Calculating Closing Costs
Closing costs can add up quickly, and it is essential to understand what to expect before beginning the transaction. To estimate your cost to close, buyers and sellers can request a Good Faith Estimate (GFE) from their lender. A GFE is an itemized list of all the fees and expenses associated with the transaction. If you need a recommendation for a good lender, reach out! I have a few that have excellent programs and lower fees.
Am I Always Responsible For These Fees?
In Colorado, it is also possible to negotiate closing costs with the other party. This negotiation can result in a lower overall cost for both the buyer and the seller, and allow the buyer to bring less money to the closing table. And in the current market we are in, February of 2023, it is common that the seller may pay a portion, if not all, of the closing costs for the buyer. However, if the market turns, and it becomes more of a seller’s market again, this benefit right now to the buyer will go away.
Conclusion
When buying or selling a property, closing costs can be a significant expense. Understanding the various fees and expenses associated with closing a transaction can help buyers and sellers make informed decisions about their transaction. By working with an experienced real estate agent and lender, buyers and sellers can ensure that they understand all the costs associated with the transaction and negotiate to reduce the overall cost of closing the deal.
You can also checkout my YouTube video on Closing Costs by following this link
