Closing time: Home buyers' closing costs vary widely by region: Study

By Amy Hoak, MarketWatch, October 16, 2009
CHICAGO (MarketWatch) -- If you're buying a home in Maryland, be prepared: That state has the highest average closing costs in the country. Wisconsin has the lowest closing costs -- and the difference is substantial, according to a recent study.
Home buyers in Maryland pay an average $8,209 in closing costs, compared with $3,738 in Wisconsin, according to Closing.com's estimates, based on the purchase of a $177,700 single-family home (the national median existing home price in August), and assuming a 30-year fixed-rate mortgage with an interest rate of 5.25% and a down payment of 20%.
There's "tremendous variance throughout the U.S.," said Tony Farwell, chief executive of ClosingCorp, the parent company of Closing.com, a Web site that helps people estimate the money they'll need to close a home purchase and allows them to comparison-shop for providers.
Buyers in Maryland, Delaware and Vermont typically pay the highest closing costs in the country, while Wisconsin, Colorado, New Mexico and Indiana buyers pay the lowest, according to the report. In general, buyers spend between 2% and 7% of the cost of their home on closing costs, Farwell said.
The calculations include taxes and fees that are set by state and local laws, and other costs that consumers have little direct control over -- including appraisals and credit reports. They also include costs of items such as escrow and title insurance, over which consumers typically have more flexibility to search for deals.
Plan ahead
Closing costs are often an afterthought -- especially for first-time buyers. That can lead to problems if they're already stretching for a down payment. And there are many first-time buyers right now, thanks in part to the first-time home buyer tax credit.
"The fun part of buying the home is the home. You're more focused on the home that you want to purchase and these ancillary fees get lost in the process," Farwell said. But it's important to pay attention to the costs. In today's market "sellers have less equity and buyers less capacity to purchase," he said. "These fees really add up."
Main closing costs will include title insurance, escrow/settlement, home inspection and pest inspection, he said. Home warranties also are common in certain states. Other costs could include inspection of a septic system, a well inspection, or a check for mold or radon. Sometimes a lender will require a land survey to be done, to make sure the property boundaries are accurate.
Buyers can root out savings
"There's ample opportunity to squeeze out some savings by comparing the different categories of closing costs among lenders," said Greg McBride, senior financial analyst for Bankrate.com.
Prepaid costs -- including taxes, prepaid interest, documentary stamps, homeowners insurance and homeowner association fees -- aren't typically at the discretion of the lender, he said. But there are other fees and costs that aren't as set.
"What you want to focus on are the lender fees and third-party fees," he said. Bankrate has a site dedicated to helping people find providers, FeeDisclosure.com.
One of the places to save hundreds of dollars on closing costs is in the selection of a title insurance provider, McBride said.
While in some states there is a mandated rate, or a promulgated rate that sets the cost of title insurance, other states allow for consumers to shop around for the best price, giving them opportunity to lower their costs, he said
Source: www.MarketWatch.com
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Legislation Protects Buyers of Foreclosed Properties

California Assembly Bill 957, also known as the "Buyer's Choice Act," was signed into law Oct 13 '09. It protects buyers of foreclosed properties by ensuring they can choose their own real estate service providers, such as title companies and escrow services, etc.

Frequently Asked Questions

• What is the Buyer's Choice Act? It prohibits a seller who acquired property as a foreclosure sale from requiring a buyer to purchase title and escrow services from a company chosen by the seller as a condition to receiving offers or selling the property.
• Who is a seller under the act? A mortgagee or beneficiary under a deed of trust who acquired title to the property at a foreclosure sale, including a trustee, agent, officer or other employee of any mortgagee or beneficiary.
• Can a buyer agree to accept the recommendations of the seller? Yes, provided a written notice of the right to make an independent selcection of those services is first given by the seller to the buyer.
• If a person violates the law, can the sale be set aside? No. A transaction cannot be invalidated solely because of the failure to comply with the law.

Source: California Land Title Association

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