I suppose technically, the question of who pays the closing costs in Vermont is negotiable. But in reality, there are some closing costs that the buyers pay and some that the sellers pay. We've put together the below for buyers and sellers in Vermont but you could apply some of this information anywhere.
Seller's Closing Costs
The seller side has pretty straightforward closing costs.
- Attorney fee
- Real estate brokerage fee
- Wire transfer fee (if wiring funds after the closing)
- Final water and sewer bill
The seller's attorney will write the deed, fill out the property transfer tax paperwork, and more.
Real Estate Brokerage Fee
Worth every penny. Pricing, pre-inspection, negotiation, contract writing, problem-solving. If your transaction went smoothly, that's because the real estate professional made it look that way. If it was a challenging transaction, imagine how hard it would have been otherwise?
Wire Transfer Fee
Most, if not all, financial charge wiring fees. This closing costs responsibility lies solely on the seller.
Final Water and Sewer Bill
Wait. Why is the seller paying the water bill? The seller is paying the water bill from the end of the last statement to the closing. You're giving the buyer the amount that you're responsible for. The buyer will pay the whole amount when the next bill comes out. You've just paid your share in advance.
Buyer's Closing Costs
Things get way more exciting and confusing when it comes to closing costs on the buyer's side. Get a load of some of these:
- Appraisal fee
- Credit report
- Flood certification (even if the house is at the top of a mountain)
- Insurance tracking fee
- Various tax services
- Legal--settlement fee
- Legal--title search and examination
- Vermont transfer tax
- Prepaid homeowners insurance
- Mortgage insurance premium
- Prepaid interest on the loan
- Prepaid property taxes
- Document recording fees
- Title insurance (owner's policy)
- Title insurance (lender's policy)
- Prorated fuel
- Prorated property taxes
Some of these depend on the loan or the lender. Others depend on the purchase price. As a super rough rule of thumb, we usually tell buyers to expect to pay 5%-6% of the purchase price in closing costs for highly leveraged loans (0%-5% down, 3%-4% for loans with higher down payments, and 2%-3% for cash. These are very rough estimates.
It's tough to pin down the cost of an appraisal. Sometimes they cost $400 and sometimes they cost $1000. There are a lot of variables, including the size of the property, the complexity of the problem, and supply and demand of appraisers.
You get to pay for the appraisal, but you don't get to pick your appraiser. The lender will do that for you. Also, depending on how cynical you are, you can either consider that the appraiser works for you to make sure you don't unwillingly overpay for a property or that they work for the bank to make sure the bank isn't under-collateralized.
You knew the lender was going to "run credit," and they did. You get to pay for that.
It's only $20 or so, and I can see you rolling your eyes. But yes, there's going to be a flood certification to make sure that your house, at the top of a mountain, is not in the flood zone. Truthfully, this is a good thing. No one wants people to be in a flood zone accidentally.
Insurance Tracking Fee
Beats me. The last one I saw was $93. Are you reassured that your insurance has been tracked? You should be!
Various Tax Services
Again, no idea. Recently I saw $88 for "tax service." So there you go.
Legal (Settlement Fee)
You're going to have someone organize all the paperwork, go through it all, show you where to sign, disburse funds, etc. It's actually really fun to watch an attorney go through all that. They turn a three-inch stack of papers into homeownership.
Legal (title search and examination)--Your attorney will go through the land records to make sure there's nothing mucky in them. What's mucky? Dozens of things. From undischarged mortgages and mechanics liens to unpermitted improvements and open certificates of occupancy. You might even find a land lease from UVM in the land records.
The title search will bring those up and then work to clear them out so that it's not mucky when you buy the property.
Title insurance (Owner's Policy)
You can buy title insurance (you should). That's a one-time premium, and it protects you as long as you own the property. If something comes up that wasn't discovered in the title search; your title insurance will work to quiet the issue or pay to make it disappear.
Title insurance (Lender's Policy)
Title Insurance for the lender's policy is pretty much the same as above, but you HAVE to buy it if you have a mortgage.
Vermont Property Transfer Tax
This is more or less a sales tax on the purchase of real estate. As of this writing, for a primary residence, it's.05% on the first $100,000 ($500) and then 1.45% on anything past that. For non-primary residences, it's just 1.45% of the purchase price.
Prepaid Homeowners Insurance
This is another one that varies wildly. Sometimes you'll be required to have one month paid in advance, sometimes three months, sometimes 12 months. Pay now or pay later, right?
Mortgage Insurance Premium
If you have less than 20% equity in the property, you have to have private mortgage insurance (PMI). Not a whole lot you can do about that. But as you make payments and reduce your principal amount and as your house is either improved or the market in general lifts prices, you might be able to get to that 20% threshold way sooner than you think.
Prepaid Mortgage Interest
If you have a 30-year mortgage, that's 360 payments. Your first payment covers the period from when you purchase to the end of the month. You pay that in advance at closing. Payments 2-360 are all paid in arrears. It just means that you have a partial month's of interest that you owe at the closing. At Green Light Real Estate, we help loads of buyers get out of paying PMI earlier.
Prepaid Property Taxes
Different lenders and different loans have varying requirements on this too. You might have to pre-fund your escrow with a couple of months or more of property taxes. You're just paying in advance, which can be comforting.
Document Recording Fees
At present, every page that gets recorded in the town clerk's office costs $10 per page. So, a three-page warranty deed costs $30. A 20-page mortgage deed costs $200.
You get to reimburse the seller for any fuel that's left at the property. Oil, propane, firewood, pellets. Am I missing anything?
Prorated Property Taxes
The buyer is responsible for the property as of the day of the closing. If the seller paid any property taxes in advance, the buyer would reimburse the seller for those prepaid taxes. Fair is fair.
Oh, here we go. You really should talk with a Green Light Real Estate professional to go through the prebate calculation. In a nutshell, the buyer will reimburse the seller for any unused portion of the seller's prebate for the tax year. And, the buyer is going to get the seller's lower quarterly tax bill for the rest of the tax year. It's kind of like paying in advance for property taxes. But again, there's more to it. Talk to someone at Green Light, and we'll explain it.
Whether you're selling a house in Vermont, buying a house or both, the process can sometimes be pretty complicated and confusing. That's why our agents at Green Light Real Estate are ready to help you! Give us a call at 802-225-6425 or email us at Info@GreenLightRealEstate.com.