Title and closing costs in Los Angeles County, CA, is a tricky subject for home sellers and buyers. But whether you are selling or buying a home in the county, it is in your best interest to know the hidden fees you are likely to incur when closing on a deal. Cognizant of the benefits of this information, Los Angeles real estate experts at Park Regency Realty, in this post reveal to you everything you need to know about home closing costs in LA. That said, let us dive in.
What Are Real Estate Closing Costs in Los Angeles County, California?
Closing costs in Los Angeles County, California, refer to the additional fees paid when settling a home purchase. Closing, also known as settlement, is transferring home ownership from the seller to the buyer.
However, the closing process is not as seamless as homebuyers would wish. When purchasing your dream home, you will need to sign numerous documents besides presenting a sizeable check catering to the down payment and plenty of closing costs. Unfortunately, these settlement costs remain a mystery to most homebuyers, especially those dipping their toes into this venture for the first time. Unsurprisingly, buyers have handed over thousands of cash without knowing what they are paying for.
Both buyers and sellers pay particular closing costs to compensate the parties involved in approving, funding, and insuring the sale. These additional fees are typically not highlighted in the property's listing and often take buyers by surprise.
For homebuyers, closing costs in California typically range between 5% and 8% of the home's purchase price but can potentially add thousands of bucks to the final expenses. For instance, the settlement costs for a $500,000 home lie somewhere between $15,000 and $75,000.
Most homeowners invest their savings on mortgage down payments. Accordingly, lender credits often finance the closing costs to lower the upfront costs for buyers but in exchange for higher monthly mortgage payments.
Often, the largest closing fee for home sellers in Los Angeles, CA, is the real estate commission, split between the buyer's agent and listing agent. This charge is usually around 6% of the home's purchase price. Other critical costs incurred by sellers include property title-related fees and transfer tax.
Buyers should be wary of the statement: the seller pays the closing costs. Whereas you (the buyer) can request a home seller to help you pay some closing costs, remember that the seller is not obligated to offer this concession. Sellers may counter this concession with a higher selling price. Therefore, it is critical to read and understand all documents outlining the costs and responsible parties before signing them.
Who Pays Closing Costs in California?
With the above sneak-peek into home closing costs in Los Angeles, let us delve into the fees buyers and sellers should expect during the transaction.
Closing Costs for BUYERS in California
» Lender's Fees
These settlement costs vary significantly from lender to lender. For example, while some lenders require borrowers to buy discount points to receive the lowest mortgage interest rate, others do not. Still, some lenders do not charge origination and application fees. As such, buyers looking for home financing in LA should compare loan estimates from various lenders. Following are typical lender's fees in Los Angeles:
- Application fee: It covers the lender's cost to process your mortgage application, including the credit check and even property appraisal.
- Origination fee: Usually 1% of the total loan, origination fee covers the lender's administrative costs.
- Discount points: This is an optional lump sum fee charged to reduce your loan interest in the loan's life.
» Third-Party Fees
A variety of professionals will charge buyers a range of fees at closing. They include:
- Private mortgage insurance(PMI): The lender may require you to pay PMI if you put down less than 20% of the property's purchase price.
- Credit report fee: Goes to the agency that provides your lender with your credit report. It averages at $25.
- Appraisal fee: Paid to the company that assesses the fair market value of the property being purchased.
- Attorney fee: Paid to the attorney who reviews the closing documents on behalf of the buyer.
- Home Inspection fee: Goes to the home inspector hired by the buyer to check for any issues. The cost varies with the inspector you choose and the property size and type.
Reach out to the Park Regency Realty for assistance in closing costs in Los Angeles County, California.
Call us now at 818-363-6116
Closing Costs for SELLERS in California
» Agent Commissions
If you are listing your home with a Los Angeles County real estate expert, you must pay the professional some listing commission- usually 2.5-3% of the final home sale. However, the percentage does not put negotiation out of the scene. Still, sellers are responsible for the buyer's agent commission, which lies somewhere between 2.5-3% of the final sale. Total agent fees in Los Angeles range between 5% and 6%.
» For Sale By Owners(FSBO) fees
Instead of selling with an agent, homeowners can opt to list their home in a Multiple Listing Service(MLS) or MLS-powered websites like Redfin and Realtor.com. FOSA fee range between $95 and 2% of the total sale price, depending on the FOSA options sellers pick.
» Title Search Fees
This fee is paid to the title company for executing a thorough search for the property's records to ascertain the seller is the rightful owner of the property and has the legal right to sell it. This sets home sellers back about $200.
» Title Insurance
Title insurance is a policy that covers home buyers from financial losses due to title problems such as illegal deeds, undiscovered will, and forgeries.
Most transactions involve two types of title insurance policies:
- Owner's title policy: It covers the buyers.
- Lender's policy: If the buyer is obtaining financing, this policy covers the lender.
» Escrow Fees
An escrow service is a neutral third party between the seller and buyer who safely holds the money and all relative documents until sale completion. The escrow company ensures that the seller does not receive payment, and the buyer does not receive the property until both parties execute all their responsibilities as outlined in the contract.
The rough estimate for escrow fees in Los Angeles is usually $2 for every $1,000 of the sale price, plus $250. For a $300k home, escrow fees would amount to (2x (300,000/1,000)) + 250 = $850.
» Transfer Taxes
The Documentary Transfer Act allows Los Angeles County to charge $1.10 for each $1,000 of the transferred property's value. However, the transfer tax may vary from city to city. For example, Los Angeles City charges a transfer tax of $4.50/ $1,000 of property value.
» Miscellaneous Costs
- Termite inspection fee
- Notary fees
- HOA (Home Owner's Association) transfer fee
- Natural hazard disclosure report
ALSO READ: Los Angeles Housing Market Stays Hot for Real Estate Investing
How Does Closing on a House Work?
House settlement is typically held in an office setting, sometimes with both the seller and buyer at the same table. Sometimes, the parties complete the paperwork separately. Before the closing, buyers can again walk through the property to ensure its condition has not changed materially since the parties signed the sale agreement.
At the closing, lenders, closing agents, attorneys, lenders, Title Company, and attorneys have prepared all papers. The documents reflect the sale agreement and allow the parties to verify their interests. For example, the buyer receives the title and the keys; the closing agent subtracts money to pay off the existing mortgage and other transactional costs from the amount credited to the seller; state governments collect their transfer taxes, and the lender has its loan recorded in public records.
If you’re new to the real estate market, keep reading to learn more about title and closing costs for when you’re just starting out, with the help of Park Regency real estate agency, who has been able to grow and flourish from its roots in Granada Hills to the following areas:
FAQs
» Can I Pay Closing Fees in Installments?
No. Note that the different parties involved in the transaction are awaiting payments, having fulfilled their responsibilities. Resultantly, the escrow company will release the funds to the service providers as per the set instructions.
» When Does the Escrow Close?
The escrow closes after the seller and buyer fulfill all the conditions outlined in the escrow account and deposit all the funds.
» What if the Property is Damaged After I Sign the Purchase Agreement but Before Closing?
Typically, it is required that the property be substantially in the same or better condition as the date you signed the purchase agreement. If the property gets damaged or destroyed before closing, the risk of loss falls on the seller. You can wait for the seller to reconstruct the property, or terminate the contract and recover any money deposit.
» Can I Write a Personal Check to Cover my Closing Costs?
You should pay the closing costs in the form of a cashier's check, issued by a Los Angeles institution, and bank wired or made payable to the escrow or title agency. Personal checks or out-of-state checks could delay the settlement or even be unacceptable to the escrow or title company.
» What is a Closing Statement or HUD-1 Statement?
It is a document that summarizes all funds received and paid by the seller and buyer. The Real Estate Settlement Procedures(RESPA) requires that all closings involving federally insured loans be reported on a form from the federal department of Housing and Urban Development(HUD).
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Ensure you are in Good Hands of Los Angeles County Real Estate Professionals
Hopefully, the above information reveals what your total closing costs in Los Angeles County, CA, might look like.
You do not want to make mistakes that will likely mess your last step to owning or selling your home in Los Angeles. So, ensure you have a reliable team by your side, starting with an experienced real estate professional familiar with the local market, can help you network with other critical team members and make the whole process seamless and cost-effective for you. That is precisely what you enjoy when you partner with Park Regency Realty for your next home purchase or sale in Los Angeles County. Park Regency Realty, based in Granada Hills, CA and has been operating in the San Fernando Valley for past 40 years, has grown to be one of the top 15 real estate companies in the Los Angeles County, with more than 190 full time agents and growing. Call us today at 818-363-616 or contact us online for a free consultation.