What Are Closing Costs?

There are lots of things that need to be taken into account when you are planning to buy or sell a property. One of those things is known as closing costs. It’s something that first-time buyers may not be aware is required. And seasoned buyers and sellers may not realize can vary greatly from state to state.

Closing costs come from a variety of fees and often overlooked expenses. So what are these closing costs?

There are lots of factors that need to be taken into account when it comes to closing costs. These can include inspections, loan fees, government recording charges, and title charges. These costs are generally covered by the buyer, although there are also instances in which the buyer can ask the seller to cover some part of the closing cost fees.

To help provide you with a clearer picture of closing costs, we will go into more detail.

Real Estate Closing Costs
pen and glasses on closing cost documents

Closing costs can change according to the area and the type of transaction performed. However, in general, the things that comprise closing costs are:

• The cost of conducting surveys
• Inspection services fee
• Appraisal services fee
• Title search fees
• Title insurance
• Closing service (including notary closing services)
• Courier and Funds transfer/wire fees
• Loan origination fees
• Assessments
• Payoffs of unresolved liens and taxes
• Mortgage and deed preparation costs
• Document Recording Fee (including electronic recordings, or “eRecordings”)
• Other

Buyer’s Fees

In general, the majority of the fees included in closing costs are part of the buyer’s deal. This is why buyers generally have to take responsibility for the payment of closing costs.

Closing costs vary according to the state, type of agency, and transaction. All buyers should acquire an estimate of the closing cost fees they are liable to pay to avoid surprises at the end of the deal. Lenders are required by law to give you this, also known as a GFE (good faith estimate).

Seller’s Fees

When it comes to sellers fees, they don’t have to worry about closing costs as much as the buyer. The only thing they will be required to do is take care of the loan payoff costs, agent’s commission, associated penalties, notary fees, homeowner association fees, and transfer taxes.

Payment Options

When it comes to closing costs, the majority of the fees fall upon the buyer. These are the ones who usually have to decide how to pay it. They can choose to pay it outright through wire transfer or with a cashier’s check. They can also choose to negotiate with the seller to cover some part of the costs in a sale. Also, some lenders offer loans with the closing costs rolled into the mortgage. This option will almost always cost the buyer more in the long run, as they will end up paying interest on these items.

Many buyers and sellers are confused about the closing costs and the types of fees included in them. If you face any confusion, you should never hesitate to ask your mortgage broker or your real estate agent to explain any fees to you.

Whiteboard Topics: 4 Signs a Lake Home is Grossly Overpriced

Buying a lake home can be stressful, especially in this seller’s market, but it’s important to know you’re getting your dream lake home at a reasonable price. Lake Homes Realty’s CEO, Glenn Phillips gives four signs a lake home is grossly overpriced.
  1. Days-on-Market: Lake homes don’t spend too much time on the market, and when they do, it’s an indicator of being unreasonably priced.
  2. Big Appraisal Gap: If the listing price and appraisal have a large gap between them, it’s a clear sign the lake home is overpriced. 
  3. Back on Market: Sometimes, a lake home is back on the market after being listed as pending. This could be due to a buyer attempting to work with the exaggerated price, but realizing it would be a bad investment.
  4. Massive Price Increase: When reviewing the price history of a lake home, take note if there was an alarming increase and whether any renovation has been done to the home to validate said increase.
Never spend more than you have to on your dream lake home. You never have to settle for overpriced properties when you know all the signs to watch out for!

Tips for Selling a Fixer-Upper

In many of our Whiteboard Wednesday videos on the Lake Homes blog, CEO Glenn Phillips has covered why now, during a pandemic, is a great time to sell your lake house. But what if your lake home isn’t in perfect selling condition, and you want to take advantage of the market? In this case, you may be selling a fixer-upper — and there’s nothing wrong with that! If this is you, here are some helpful tips straight from top real estate experts across the country.

Focus on the Shell

If you’re selling a fixer-upper, don’t worry about the interior. Just make sure your home’s overall structure is sound so buyers will see the potential in your home. “When the shell is good, you care less about the interior finishes,” says real estate expert Steve Laret. “People come for the exterior. They are willing to chalk up deficiencies inside. What matters to people the most is that slice of water they can see from the cabin. How buyers value that is anybody’s guess.” 

With lake properties specifically, one way to improve your home’s structure is by improving your home’s water access. For example, while you can’t change the water’s depth, you can install stairs and invest in a new boat dock. At the end of the day, buyers want to know whether they can store their boat at your home and how easily they can access the water.

Focus on the Market Now

The lake real estate market has undoubtedly changed since COVID began. On the one hand, people have been investing much more in lake houses because of the social distancing benefits, so it’s an excellent time for sellers. However, this trend may not last forever. Steve Laret warns, “Step on it before the fallout comes. This will likely be 18 months out from the start of COVID. Typically, that is how long it takes from something that’s shut down the economy to rear its ugly head.” If you’re looking to sell lakefront property, fixer-upper or not, it’s best to get it done right now before the eventual fallout. This trend is based on what happened in other devastating events such as stock market crashes and the aftermath of 9/11.

Know Your Price

Sometimes, as a seller, you can get into a state of disillusionment regarding the price of your home. We understand this. You’ve spent a lot of time at your lake house, you love it, and believe it should be worth a lot of money to any buyer. However, your bias may skew your perception. “If you’re selling a fixer-upper, have your realtor do a market analysis of your house as if it were already fixed up,” says Henry Washington, real estate investor who specializes in buying and renovating homes. That will give you a realistic value of the house after the home improvements. You’ll be able to include this in your listing. 

Additionally, ask your realtor to give you information about rental prices per night on fixed-up properties. AirDNA is a good resource that provides analytics behind Airbnb to price your rental correctly.

Put Yourself in the Buyer’s Shoes

Photo courtesy of Auction.com

A little bit of perspective-taking goes a long way. Ask yourself, “If I were a buyer and had to fix up this house, what would I be looking for?” In doing this, you should focus on the future. After all, you are not selling your current home — you are selling a vision for your current home’s potential. One way to cater to the buyer is to make small changes that will make your home more marketable. For example, Washington recommends replacing old light fixtures with more modern choices. “It can have a huge impact on the place,” he says. “It’s a pretty inexpensive fix that might help bring more offers in or sell for a higher price.” He also recommends updating the mirrors on bathroom walls to modernize the space. These are little ways to say to the buyer: “Look what this home can be!” 

For more information about selling your lake home, connect with one of our many Lake Agents at Lake Homes Realty!

Whiteboard Topics: 3 Dangers of Selling Your Lake Home in 1 Day

While it might sound good for an agent to have a lake home sold in one day, it may not be in your best interest as the seller. You may get a great offer that first day or that first weekend, but here are three reasons to hold off on deciding too soon.

  1. Winning and THEN deciding. Some buyers will win the highest bid before they decide if they even want the house. They know the market is hot, so they will bid high and then decide to go through with the offer or renegotiate using contingencies. People who are more methodical will most likely not jump on the first day.
  2. Fewer offers. You may get several offers the first day or first few days but waiting even two weekends will give time to the methodical buyers to think through an offer.
  3. Out of town buyers. These buyers cannot come in a day. If you give a longer window of time, they will show up with intention and will often have the best deals for the seller.

Whiteboard Topics: 3 Surprising Risks When Selling a Lake Home in 2021

There are different aspects to selling your lakefront property than if you were to sell a landlocked property. These are the surprising risks to be aware of when maximizing the return on your value and investment. 

  1. Sell really fast. Selling your home quickly will not get you the best return on your dollars. A lot of lake home buyers are from out of town or out of state, and you may limit the number of buyers that can’t respond quickly enough. 
  2. Rushing through the transaction. This is a legal transaction involving a lot of money and it’s important to read and understand what you’re signing. Avoid any legal issues in the future by taking your time.
  3. Overpricing. The best way to get the best price is to price appropriately and leave room for competition. Overpricing drastically for the current market will cost you time and money, even in a hot market.

We hope you find these tips valuable as you venture out on your journey to selling your home. Please feel free to reach out to our lake experts for guidance.

Whiteboard Topics: 6 Tips for Maximizing the Price of a Lake Home in a Hot Market

Are you ready to sell your lake home or property? Before you make the move to list your home, here are 6 tips for maximizing the price of your lake home in a hot market.

  1. Plan Beyond Listing. Be sure you have a plan beyond just getting the home listed. Oftentimes, home sellers overlook other factors such as the amount of time it takes to communicate back and forth between agents as well as setting expectations on home offers.
  2. Sale Period. Make sure you appropriately set your sale period long enough to include all potential homebuyers in the market. Keep in mind that lake home buyers are not always local buyers and are oftentimes from out-of-state.
  3. Out-of-State Buyers. Because a large portion of lake home buyers from out-of-state, you need to maximize access to these potential buyers. Make sure you have an agent that is not only knowledgeable about your lake area but also has a healthy pipeline of these highly qualified buyers.
  4. Cleanliness and Staging. A clean and well-staged property is a must if you want to maximize the price of your lake home. If your property is not picture-perfect, you might run the risk of having your property overlooked or having it undervalued by potential homebuyers.
  5. Highest Offer May Not be Best. The highest offer is not always the best offer as there could be many contingencies associated with them. High offers with high risks have a higher chance of falling apart.
  6. Lake Expert Agent. Be sure to have a lake expert on your side. Selling lake property varies by lake and it is imperative that you have an agent that understands the nuances of your lake and lake home.

Whether you’re buying or selling your lake home or property, our agents at Lake Homes Realty can help provide insight into today’s lake real estate market and guide you in your home journey.

Whiteboard Topics: 5 Reasons to List Your Lake Home Before Spring

Are you thinking of selling your home this year? You might think that spring would be the ideal time to sell your home, but we think otherwise. Here are 5 reasons why you should list your lake home before spring.

  1. Lake buyers schedule. Lake home buyers have a different schedule. Because lake homes are not considered a discretionary purchase, the average lake home buyer is not affected by decision-making drivers such as school year cycles, job relocations, etc.
  2. Hot for selling. The lake real estate market is hot right now. There are buyers wanting to buy now and have their home ready for spring.
  3. Economy. The economy is strong right now but during these unprecedented times, the state of the economy is unpredictable. Therefore, buyers are less likely to pay an optimal price or might opt to wait on purchasing their lake home.
  4. Reduced inventory. Lake home buyers are wanting to make a purchase now. If you wait until spring to list your lake home, you’ll be faced with increased competition as more home sellers will be listing their homes as well.
  5. Time Value of Money. Expenses such as a mortgage, utilities, and home maintenance costs could be reduced if you list and sell your home now instead of waiting until spring.

We hope you find these tips valuable as you venture out on your journey to selling your home. Please feel free to reach out to our lake experts for guidance.

Whiteboard Topics: What is Title Insurance?

One thing in a real estate transaction that some people may not understand is title insurance. They may ask themselves “What is it?” and “Do I really need it?” To navigate the confusion or uncertainty, here are three things to know about title insurance.

  • Right to Sell. Title insurance is basically just insurance that guarantees that the seller has the right to sell that property. There can be a lot of confusion surrounding whether someone has the right to sell a property — whether that be fraud, a mistake, or ownership uncertainty — but title insurance can help clarify and clean up that misinformation. 
  • Clients Can Shop. You can shop around for title insurance that best fits your needs. The price of title insurance typically reflects the sale price of your home, and relative to many of the other costs involved in a real estate transaction, it isn’t that expensive. Though there are laws in place to protect buyers and sellers from fraudulent title insurance companies, you always have the option to shop around and get prices from various suppliers. 
  • One-Time Cost. This is not a recurring payment. It is a one-time cost that takes place at a closing. Once the title insurance company is paid, they will do additional filings and verifications at the courthouse, and several days later, the buyer will receive their policy.

Whether you’re buying or selling your lake home or property, our agents at Lake Homes Realty can help provide insight into today’s lake real estate market and guide you in your home journey.

Whiteboard Topics: 4 Things to Consider When It Comes to a Guaranteed Sale Program

Even though we do not do this as a brokerage, some businesses in the real estate industry may propose a guaranteed offer for your home if they don’t sell it. And while that could be a good opportunity in some cases, here are four reasons why you should be thoughtful when considering an offer like that as you plan to sell your lake home or any other property.

  • Understand. Make sure you fully understand what this offer entails, including the fine print. Some people may assume that if their home does not sell, the company will take their asking price and give them that amount. However, there are usually some caveats to this offer that are not always obvious. Be sure to ask questions and do not be shy — this is your house!
  • Not Full-Price. A “guaranteed” offer is not necessarily a “full-priced” offer. Since there are so many wholesalers who partner with brokerages, these offers are usually discounted. Understand what “guaranteed” means relative to price.
  • Cost of Time. A lot of these deals have timelines where if your home does not sell in a certain number of days, then they will move forward with their process. This means that if that path does not come to fruition or you do not want to take one of the guaranteed offers, you may have to start over with your marketing, thus making your home appear stale since it’s been on the market for a while. Be aware that if everything does not work out, you need to know how much time that will cost you.
  • If It Looks Too Good… This does not mean that anyone is being deceitful, but oftentimes if it looks too good to be true, it just might be. Make sure you know what the offer really is and how it applies to you and your situation. 

Whether you’re buying or selling your lake home or property, our agents at Lake Homes Realty can help provide insight into today’s lake real estate market and guide you in your home journey.