California Real Estate: Who Pays For What?

RE Fees

Customary Fees

In most areas in California, at close of escrow the buyer pays:

  • escrow fees (50/50 split)
  • title insurance fees (for 2 policies protecting the interests of themselves and their lender)
  • loan origination fee and discount points
  • miscellaneous doc drawing and courier fees
  • inspection and appraisal fees
  • loan closing costs, like prepayments of property taxes, interest, insurance and homeowner’s insurance or HOA dues, when the buyer is obtaining a loan with an impound account or as otherwise required by the buyer’s lender.

And the seller pays:

  • escrow fees (50/50 split)
  • broker commissions
  • a re-conveyance fee to their lender
  • buyers home warranty

However, ALL of this is open to negotiation. These are standard practices, but vary more and more in this market climate.

Also, be aware that with bank-owned properties the standard allocations are somewhat different. For example, banks often will pay for the buyer’s title insurance policy, assuming the buyer uses a title provider the bank chooses. Or, the bank may defer to the buyer to elect the title company at which point the buyer is responsible for title and escrow fees.

Also, costs like HOA transfer and documentation fees, city and county transfer taxes, and even escrow fees are often negotiated between buyer and seller. Additionally, many times buyers agree to “pay” their customarily allocated fees, but then negotiate a closing cost credit from the seller that covers some or all of that.

Loan closing fees vary significantly by loan type (i.e., FHA vs. conventional). Also, transfer taxes also vary widely in different California counties; I see transactions where buyers need to be prepared to pay anywhere from 2 to 6% of the purchase price in closing costs – depending on the location. Again, this can be reduced if the buyer is able to negotiate for the seller to pay some or all of their closing costs.

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