Author’s note: This is a selection from my new book, How To Buy A Home and Not Lose Sex: Find the Best House, Make the Best Offer, and Keep Your Love Life, which you can purchase on Amazon by clicking here.
In the next few weeks I’m going to cover all the closing costs I can think of. In past weeks I’ve covered the down payment, the cost of a Realtor, earnest money deposits, prepaid closing costs, flood elevation certificates, insurance, escrows, title insurance, lender fees, PMI, funding fees. This week I cover add-on fees, sales tax, and (for the second time in this series) freaking out about closing costs!
How Is It Possible That There Are Still MORE Closing Costs?
Yep, there are just a few more closing costs. I know; how is this possible?
Well, if you want to buy a house, the people in government know you’ll pay just to get through it. They know if they charge just enough, but not too much, they can fill the county or state coffers just a little bit more. All so they have enough money available to steer that sodding contract for the US 1 median to a certain county commissioner’s brother-in-law.
Anyway, these last closing costs are going to be the minor add-on fees that counties, states, and cities might add to your transaction.
In my home state of Florida, buyers pay recording fees to the clerk of courts, and something called an “intangible tax” based on the value of the loan.
That’s right, someone loans you money on a house that you have to pay back with interest, and the state taxes you on it.
To be fair, the intangible tax is never much more than a few hundred dollars. But really, charging someone tax on a loan they’re already paying interest on? Charge the bank, not the buyer!
Doubtless there are these little add-on taxes in your state too. Make sure you are aware of what they will be as you head into closing.
Is There Sales Tax on My House?
Like you need one more tax.
I do not know of any specific state that charges regular sales tax on the sale of a house. But I have not checked all 50 states specifically, so there might be one out there. It is a good question to ask your Realtor or lender when you get to the point of hiring one.
One indirect way you might pay sales tax on a home purchase is when you build a new home. All those building materials that go into your new home will have sales tax levied on them at the time of purchase, and those costs will be built into the costs of your new home.
What To Do When All These Fees Wig You Out
You’re still freaking out, aren’t you?
You’re freaking about all these fees that you never heard of until this moment.
You’ll freak again at some point during the sales process. Maybe something weird comes back on an inspection, or the seller is acting like a royal arse, or something.
And you’ll freak in the days before closing because your bank paperwork is late and, by the way, you aren’t packed yet, and you’re moving at the end of the week.
Hang in there.
You’ll have a real estate agent, a lender, and even a title company you can use to ask questions.
Communicate with these folks to get a handle on these things as they evolve.
They will love you for it. Why? A lot of buyers disappear after a contract is signed—for real! Sometimes they don’t even bother to show up for the home inspection.
Then they yell at closing because of the costs.
Don’t let that be you.
True story: One of my aunts emailed me this year while she was selling her home in Indiana. She was having her freak-out moment because there was something called “title insurance—owners policy” that she was paying for on her settlement statement.
Her Realtor should have given her a heads-up on title insurance when a net sheet was prepared at the time of offer. But title insurance is something we Realtors deal with every day. It’s so woven into the closing process that we forget about it. And the truth is, sellers usually don’t look at the itemization on an offer sheet anyway; they just look at the net. It’s not until closing that they actually look at each individual charge.
So I emailed back: “You need it. You want it. It’s a normal charge, and if there are any endorsements, pay for them. I can explain why you need it and what it is, if you want me to.”
If you are thinking about buying a home, please consider hiring myself and my team as your Realtors. We can help you find the best house and make the best offer. Contact me at Sean@StAugTeam.com or my partner Kate at Kate@StAugustineTeam.com.