Fees associated with the buying or selling of a property, are called closing costs. If you are a buyer or seller you are responsible for certain fees; there are other costs involved that are negotiable or determined by local customs. In the Storm Lake, Iowa area the typical closing costs are customarily around 3% of the purchase price.
Buyers When a buyer applies for a loan, federal law requires the lenders disclose the fees they are requiring to make the loan, this is called a good-faith estimate. The fees vary depending on several things, including the type of loan the buyers have applied for and the terms of the purchase agreement. Some of the closing costs, especially those associated with the loan application, are typically paid in advance. Most buyer closing costs include:
- The down payment
- Loan fees (points, application fee, credit report)
- Prepaid interest
- Inspection fees
- Appraisal
- Mortgage insurance, usually one years premium and 2 months additional for escrow
- Hazard insurance, usually one year premium and 2 months additional for escrow
- Documentary stamps on the note
Seller If the seller has an existing mortgage, their most important closing cost is paying off the balance of their loan. Before the date of closing, the closing agent will contact the seller's lender to verify the amount needed to pay off the loan. Then, along with any other fees, the original loan will be paid for at the closing prior to the seller receives any proceeds from the sale. Other seller closing costs can include:
- Broker's commission
- Transfer taxes
- Documentary Stamps on the Deed
- Title insurance
- Property taxes (prorated)
- Septic System Inspection
Negotiating Closing Costs
Closing costs just like sale price can and are negortiated. For example, A buyer has offered on an acreage and it has an existing septic system that has not been inspected or pumped for 10 years. This system does not meet the new state requirements. The cost to pump and inspect the system can be a negotiable term as can any resulting repairs that the county sanitarian would require. It is not unusual for a buyer to ask the seller to pay their closing costs (many lenders recommend buyers ask for closing costs), likewise it is not unusual for the seller to counter back with an amount that will cover the closing costs.
Prorations
Taxes are the main item that is prorated, however other items like crop land rent can be prorated. Prorating in a property closing is a division of something between the buyer and the seller. There is a common saying that usually applies to the sale of a property in the Storm Lake, Iowa area, "If you are selling you write a check at closing, if you are buying you get a check at closing. This is because property taxes are typically paid at the end of the year for which they were assessed.
For more information on tax prorations see the following site:http://publicrecords.onlinesearches.com/Iowa-Assessor-and-Property-Tax-Records.htm