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How to Calculate Closing Costs in California

There’s no place like California. The sun, the sand, the surf… and the high cost of living. If you’re thinking of selling a home in the Golden State, you’ll need to be prepared for closing costs that are significantly higher than the national average. But, what are the closing costs and how much are they? Are you actually going to be able to afford to sell your home? 

If your mind is whirling with all these questions you’re going to want to keep reading! This guide from Osborne Homes provides everything you need to know about closing costs so that you can budget accordingly and be prepared for anything. Let’s get started!

A breakdown of California closing costs – What’s all included?

Let’s take a look at what closing costs are going to show up on your closing statement, how much they are, what they’re for and who pays for them. We have all the answers for you, right here.

We want to buy your home and we will pay ALL the closing costs!

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Escrow fee 

This is a fee charged by the company that handles the transaction for the sale of your house, and it covers their costs for managing it all. Escrow fees vary depending on the company’s rate and the cost of the property being sold. Once you have these two prices you can figure out the total escrow fee.

Let’s say the property is selling for $500,000 and the escrow company charges a $350 flat fee plus $1.75 per every thousand dollars of the sales price. To calculate the escrow fee, take the $350 plus $850 (which is $1.75 x 500), which comes out to $1,225.

Now, as far as who pays for the escrow fee, that is negotiable. Usually, the parties agree to split it or one party offers to pay it all.

Title search and title insurance

A title search is an examination of the public record to determine the ownership of a property and any liens or encumbrances against it and the title fee usually costs from $75-$200. Title insurance is a policy that protects the buyer and lender from losses arising from defects in the title. The cost of title insurance varies depending on the location and value of the property however on average a policy costs around 0.17% of a California home’s final sale price. So for a $500,000 house that would be $850. The seller typically pays for the title search, and the buyer pays for the insurance policy, though this is all negotiable.

Recording fees

Recording fees are paid to the county in which the property is located and are generally due at the close of the sale The fee is based on the number of pages that need to be recorded and ranges from $15 to $30. The exact amount will be provided by the escrow company handling the transaction. In most cases, the seller will pay for the recording fee as part of their closing costs. However, it is possible for the buyer and seller to negotiate who will pay this fee as part of the overall purchase price. Regardless of who pays for it, the recording fee is a necessary cost when selling a property in California.

Loan origination fee

A loan origination fee is just what it sounds like – a fee charged by the lender to originate, or create, the loan. This fee is typically 0.5% of the total loan amount and is paid upfront by the buyer. For the $500,000 sale that would be $2,500. Some lenders may wrap the origination fee into the total loan amount, while others will charge it separately. Either way, it’s an important fee for buyers to be aware of when shopping for a mortgage.

Real estate commission

In California, the typical real estate commission is approx. 5% of the final sales price of the home, so for a $500,000 home that would be around $25,000. The commission is typically split evenly between the buyer’s and seller’s agents, with each agent then receiving a portion of their respective brokerage’s commission. In most cases, the seller is responsible for paying both their own agent’s and the buyer’s agent’s commissions out of the proceeds from the sale. However, there are some exceptions to this rule, so it’s important to discuss the details with your real estate agent prior to listing your home. For example, in some instances, the buyer may agree to pay a higher purchase price in exchange for the seller paying both agents’ commissions. Whichever arrangement you choose, you can be confident that you’ll receive quality service from your real estate team.

How to calculate closing costs on the sale of a California home

As you can see above, closing costs when selling a California home can vary depending on a number of factors, but on average they are about 5.7% of the total sale price, including realtors fees. So for a home sale price of $500,000. That makes your closing costs sit at right about $28,500.

Yes, the buyer splits some of the closing costs with you, and yes, it comes out of the proceeds of the sale of your home – but if you still have a mortgage to pay off, or you had to pay for repairs to sell the home in the first place, you might find yourself in a bind. Are you actually going to be able to afford to close on the sale of your home? Considering what you plan to do with the proceeds from your sale – if there will be any proceeds – can you really give up that large chunk of cash to closing costs? 

How to avoid closing costs on the sale of your California home

If you find yourself questioning whether or not you can even make the sale of your home possible after learning all about these California closing costs, we have some good news for you: There IS a way to avoid having to pay for any of the closing costs at all. In fact, it is also a way where you would avoid having to make any repairs to your home, too. 

Want to know what it is? It’s simply selling your home to us here, at Osborne Homes. We will take it off your hands as-is, so no need to make any repairs. We will take care of all the costs associated with the closing AND we will pay you ALL CASH for it. Sound too good to be true? It’s not! You will still have the property tax and transfer taxes to pay yourself, but those typically don’t add up to much. Contact us today to find out more about how to make this fee-free home sale happen for you.

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