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Buyer Closing Costs

Closing costs can add up quickly at a closing, and include title insurance, attorney’s fees, bank attorney’s fees, title searches, survey costs, discount points, processing fees, mortgage broker commission, etc. etc. You also have reserves picked up by the bank for hazard insurance and real estate taxes, and you will need to have current real estate taxes paid up at closing. You may need to give the seller a credit for taxes already paid by them to the end of the tax period, and they may wish reimbursement for oil left in a tank.

At the start of the mortgage process, and even before the contract is entered into, a purchaser should review a good faith estimate of costs before proceeding with the deal, to make sure there is enough money to close. You should also have a cushion of approximately $5,000 above the good faith estimate for items that cannot be calculated with accuracy in advance, or for items that were underestimated. Some items don’t need to be listed on the good faith estimate.

A knowledgeable attorney should review the good faith estimate, because I personally have seen some that are much lower than the actual closing costs. One that I reviewed didn’t even include the statutory amount for title insurance, which is set by law and shouldn’t have to be an estimate. Many times, bank attorney fees are not included on a good faith estimate. Also, title search fees may be lower than the title company that your attorney chooses charges. You should compare this with the actual estimated title bill. Also be aware that different title companies charge different amount for the necessary searches, and there is no set amount by law.

Sometimes you can negotiate to have some of the fees waived, but GET EVERYTHING IN WRITING. Bring all of your documents, showing the interest rate, mortgage points, fees, commissions, etc. to the closing. If the bank documents, which are not available to your attorney prior to the closing, do not reflect the proper interest rate, or the bank is deducting more than promised from the mortgage proceeds as their fees, then you need to have proof for you or your attorney to have any leverage in having things fixed. Also research your mortgage broker, or use a well-known reputable bank.

Recently I have been at closings, either on behalf of my client, or across the table, where the interest rate is slightly higher than promised, the fees are higher than promised, the documents are flat out wrong, or the money does not even fund at the closing. Sometimes the closings have to be adjourned, which creates problems for people who have made moving plans. Sometimes the problems are taken care of by calling the mortgage broker to amend the closing costs. The best thing is to be prepared with everything in writing to back up what you’ve been told. At a closing, saying that someone verbally promised you a waiver of a fee, etc. is most likely not going to be honored.

Cynthia M. Burke, http://www.nyrealtylaw.com

Categories: Real Estate Law