by Laura Mueller
When purchasing land, many buyers look at the listing price alone when determining whether a specific property is in their budget. However, there are some other major cost factors to keep in mind too—including closing costs.
Closing costs refer to a range of fees used to finalize a real estate transaction. These are additional costs paid on top of the purchase price, and for most buyers, end up adding thousands—or even tens of thousands—of dollars onto the initial spend. For this reason, it’s crucial to factor in closing costs when determining whether a piece of land is in line with what you can afford.
Here are some quick things to know about paying closing costs on land, including what they cover, who pays them, and whether or not you can negotiate them.
Types of land closing costs
There are a variety of different cost factors included in land closing costs. They may vary depending on how you finance your land purchase and who you use to finalize the deal, but ultimately these are the costs you’ll need to consider as you figure out just how much a piece of land might run you.
• Escrow fees – In addition to paying escrow itself, there are also escrow fees, including fees to hold funds and facilitate the transaction.
• Lender fees – If you take out a loan for your land, expect to pay for origination charges, processing fees, credit report fees, and application fees, among other possible related costs.
• Title fees – There are fees for title searches and transfers, as well as for your basic owner’s title insurance policy.
• Transfer taxes – There are taxes involved in transferring land from one owner to another (usually a set percentage of the transfer price), with the specific rate depending on what state you’re buying in.
• Recording fees – These are fees for drafting and recording the land sale in public records.
• Agent and attorney fees – Commission fees for both the buyer and seller’s agent, plus any relevant attorney fees.
• Other third-party fees – Plan on having additional closing costs for paying appraisers, surveyors, inspectors, and anyone else whose services you employ to close out your purchase.
Who pays land closing costs?
In most land sales, it’s the buyer’s responsibility to cover closing costs. That being said, some buyers are able to arrange to split closing costs with the seller—or even have the seller pay for all of them. The better deal you’re offering from the start, the better chance you have of relieving some of the closing cost burden, since a seller may be willing to cover some or all of the costs if it means a shorter closing period or a cash purchase.
Are closing costs for land negotiable?
Everything in real estate is negotiable, and that includes closing costs. Who pays, how much they pay, and when things get paid out are all things that you may be able to negotiate in your favor, though there are never any guarantees.
In order to avoid closing cost sticker shock, work with your real estate agent to calculate what your costs are likely going to be prior to even putting in an offer. From there, you can start working with your agent and the seller’s agent to ensure that you pay the best price and get the best deal—closing costs and all.
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