If you're buying or selling a home, you've likely heard the phrase "closing costs" thrown around. But what exactly are they and how much should you expect to pay?
Let's break down the typical closing costs in our local market, explain who pays what, and help you avoid surprises before signing on all that paperwork.
What Are Closing Costs?
Closing costs are the fees and expenses (outside of the purchase price of the property) that are paid to complete the transaction. They typically range from 2% to 5% of the home’s purchase price, depending on a few things like the property type, loan structure, how the purchase contract is written and of course, final negotiations.
Typical Buyer Closing Costs in Santa Barbara County
Loan Origination Fees (Not applicable if you are an all cash buyer)
- Charged by your lender for processing the loan (think processing fee, underwriting fee, documentation fee)
- For example, if you are buying a $1.85M home your charges could be around $2,370
Appraisal Fee
- Required by lenders to confirm property value
- $700–$900 locally
Credit Report Fee
- Minimal, usually under $100 (and some lenders even waive this fee!)
Escrow Fees
- Covers the third-party service that handles the transaction
- Often split 50/50 between buyer and seller
- Buyer Escrow fees usually include Notary Signing Fee, Recording Services, Loan Services Fee, etc. \
Recording Fees
- Paid to the County to officially record the deed
- Varies, but usually $100–$250
Prepaid Property Taxes & Insurance
- Covers the first months of taxes and homeowner’s insurance (which is obviously on where you live in Santa Barbara... homeowner's insurance could be our next blog post!)
- Amount depends on the closing date
Typical Seller Closing Costs
Real Estate Agent Commissions
- Largest seller expense: usually 5%–6% of the sale price
Escrow & Title Fees
- Often split, but terms can vary based on purchase agreement
- Seller Escrow fees usually include Title Insurance (can be negotiated as this comes from Purchase Contract), Notary Signing Fee, Recording Services, Loan Services Fee, etc.
Transfer Tax
- In most purchase agreements agents write, they request the seller to pay for transfer tax. $1.10 per $1,000 (Santa Barbara County standard). This can be negotiated, but we generally see the seller pay for this.
Seller Concessions (if negotiated)
- For example, credits toward buyer’s repairs or loan points
Outstanding Liens or HOA Dues
- Loan and HOA fees must be paid in full before the sale can close
- For example, in Hope Ranch sellers usually pay for La Cumbre Water Transfer Fee, HOA Transfer Fee and HOA Inspection. Sellers then also get a credit for HOA prorations. (These can also be negotiated as they come from the purchase contract, but generally this is what sellers pay for)
Final Tip
Before you make or accept an offer, just ask your agent or escrow officer for a Net Sheet or Closing Cost Estimate. This will help you understand your actual bottom line, not just the list price!
And of course, here to help in any way I can!
~Mckenzie
