What Fees Are Included in Closing Costs?

Looking to buy real estate? If you do, one of the items you will encounter is the closing costs. 

What are the fees that you should expect to pay in closing costs when you settle on the property? Ryan Haley breaks down the usual fees that come with these costs. 

Transfer Taxes

The first fees that are most commonly included—and this is typically going to change in value or range depending on the state or municipality—are the transfer taxes. 

In Worcester County, Maryland where Ocean City is located, the transfer tax rate is 1.66% of the purchase price. In Delaware, it is a bit higher at 4%. That is typically split between buyer and seller. 

Mortgage-Related Fees

In addition to transfer tax rates, if you’re getting any kind of mortgage, the buyer will be responsible for any loan origination fees and/or costs associated with that mortgage. Every mortgage company is going to have different fees and different rates. You could even be paying discount points to reduce the interest rate. But those fees will be paid by the buyer. 

Title Fees

Additionally, in the State of Maryland, the buyer gets to choose whatever title company they would like to handle settlement for them. With that, you are going to see title fees including title insurance with both an owner’s policy and a lender’s policy if there’s a loan. You’re also going to see costs to record the deed as well as title search fees. Again, these are buyer’s costs. 

Other Fees

Lastly, among the bigger ticket items that we see, depending on the time of the year, are the prorations of any real estate taxes, condo fees, HOA fees, and wastewater fees.

As a second-home buyer in the Greater Ocean City area, it is expected that a buyer, in most cases, will have to pay the real estate taxes in full. This is typically for one year in advance. Thus, depending on the time of the year, the real estate taxes that will be part of the closing costs could be higher. 

Your lender might also have requirements for reserves that they want to keep on hand. Normally, you are also paying any kind of HOA and condo fees in advance. 

Final Words

Those are the most common fees that the buyer can expect to pay as part of the closing costs. Usually, you can gauge 5% of the purchase price as a rough estimate of the closing costs, which you will need in addition to your downpayment to make a purchase.