Allocation of costs associated with ownership of the home: These costs include the following:
Property Taxes: Property Taxes in California are placed as a lien on a property July 1st of each year, and are for taxes for the period 7/1 through 6/30. These taxes are due and payable by 12/15 and 4/15 of the taxable year. At closing, property taxes are either allocated to the buyer or seller depending on the date of closing and the time that the last property tax payment was made by the seller. For instance, if a property closed on October 1st, the seller, in all probability, has not yet made the first installment of taxes for the tax year that began July 1st. Therefore, the seller would owe taxes for the period from 7/1 through 9/30, or for 3 months, or 25% of the total property tax bill. This would appear as a credit owed to the buyer on the closing statement, reducing their closing costs, and as a debit on the sellers closing statement, decreasing the sellers net proceeds from the sale. If the property, however was sold on 5/31 and the seller had paid both installments of property taxes which were due on 12/15 and 4/15, then the buyer would owe the seller for one month of taxes which had been prepaid by the seller, for the period from 6/1 to 6/30. This would appear as a debit on the buyer's closing statement, increasing their closing costs, and as a credit on the seller's closing statement increasing their proceeds from the sale.
Mortgage Interest: Mortgage payments are set up to be due on the 1st of each month, and pay both a principal payment, as well as interest owed for the prior month. If a buyer's loan closes on 4/15, the lender will charge prepaid interest for the last 15 days of the month that the loan closes, which will appear on the buyer's closing statement. The first mortgage payment for the buyer won't be due for approx. 45 days until 6/1, since the interest for April has been prepaid at closing, and the interest for May isn't owed until the first of June, in arrears. The seller will also receive a charge for the interest owed on the seller's current loan from the date of their last loan payment until the closing date of sale, which will appear on the seller's closing statement. The amount of interest and principal owed by the seller is received by escrow through sending a demand notice to the lender requesting loan payoff information and a per-day interest calculation so that escrow may accurately prepare the closing statement based on the exact day of closing.
Homeowners Association Dues: If the seller has paid for Homeowners Association dues for the month that the transaction closes, there will be an allocation to the buyer for the prorated amount of dues for the month of closing, which will appear as a debit on the buyer's closing statement increasing their closing costs, and as a credit on the seller's closing statement increasing their sales proceeds.
Closing Costs Paid by the Seller Only:
Termite Inspection Fee: The Seller normally pays for a termite inspection report, and normally pays for the cost of recommended repairs. This cost may be paid outside of escrow or sometimes at closing by the seller and would appear on the seller's closing statement.
Homeowners Document Preparation Fee: This is a fee charged by a homeowners association to prepare copies of their articles of incorporation, by-laws and amendments requested by the seller to be provided to the buyer during the buyer's due diligence period.
Real Estate Agents Commissions: The seller pays both the sellers and buyers real estate sales commissions through escrow, and will appear as a debit on the sellers closing statement reducing their sales proceeds.
Escrow fees: The seller pays their share of escrow fees through escrow closing. See my web blog entry at How are Escrow Fees and Title Insurance Fees Calculated in Southern California?
Sub-escrow fee : This fee is normally charged by the title company for their costs in coordinating the close of escrow with the escrow company, and receiving the funds from the new lender, and paying off the existing lender, and forwarding the remaining funds to the escrow company for final disbursement. Sub-escrow Fees:are typically $95.00 - $125.00.
CLTA Homeowners Title Policy: The Seller will normally pay to provide the buyer with a title insurance policy insuring the buyer's equity interest in the home. See my web blog entry at How are Escrow Fees and Title Insurance Fees Calculated in Southern California?
Notary Fees: Fees charged by a Notary to notarize documents relating only to the seller (grant deed, etc. )
City Report Fee: Some local municipalities require the buyer to order a report on the property from the City
Natural Hazard Zone Disclosure Report: The seller normally pays for the preparation of a Natural Hazard Zone Disclosure Report which indicates whether the property is located in a natural hazard zone, such as a high fire risk, earthquake zone, flood zone, etc.
Home Warranty Fee: The Seller typically provides a Home Warranty Policy to the Buyer to cover repairs to the property during the first year of occupancy, and often covers appliances, air conditioning and heating systems, etc. These cost approx. $400-$450.
City and County Transfer Taxes: The Seller normally pays for any required transfer taxes by both the local municipality as well as the County. The Documentary Transfer Tax: for most cities and the County of Los Angeles is a combined $1.10 per thousand of the purchase price for "new money" which is purchase price less any existing loans on the property being assumed. New Loans to purchase the property are considered "new money". Redondo Beach has an additional property transfer tax of $2.20 per thousand dollars, and San Pedro and the City of Los Angeles has an additonal property transfer tax of $4.50 per thousand.
For additional information on closing costs, go to Closing Costs , HUD Closing Cost Information or California Escrow and Closing Costs DRE
For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.