April 13, 2006

Ask The Lawyer

When selling property, who pays what closing costs in Santa Clara County?

This week’s question:
My husband and I are thinking about selling our house here in the Almaden Valley some time late this spring or this summer. We are curious as to what kind of closing costs to expect. Can you give us some idea as to what is customarily done in this area? Also, just what items are set by agreement between the seller and buyer?

Abby A.
Almaden Valley

Dear Abby:
Your question is a good one, and it pays huge dividends to do your homework as you are doing.

First of all, it is very important to remember that many items are open to agreement or contract between the seller and buyer. Your contract will be an extremely important document and will include many different items.

If you have a real estate agent help you, one of the first contracts you will be asked to sign is the listing agreement. This agreement will typically call for a sales commission to be paid at the closing.

The commission amount is negotiable—open to agreement. Some people think that it is "always" 6 percent, but this is not accurate. You can negotiate for a 5 percent commission and even 4 percent if the selling agent also finds a buyer. Or, you can negotiate for any other amount you can agree upon. After all, it's your house.

If you decide to sell your house by yourselves and without the help of an experienced agent, you will not have a listing agreement with an agent. However, at some point in time you will need to have a contract written up and signed with the buyer. You may well want the contract reviewed by your attorney before it is signed.

Sellers
In Santa Clara County, the sellers generally pay for their real estate brokerage fee, title insurance fee and document preparation fee for the deed. The seller also generally pays for the escrow fee and the county transfer tax of $1.10 per $1,000 of the sales price. Any city transfer tax, which can be substantial ($3.30 per thousand in San Jose), is often divided 50-50.

The seller also generally pays for any agreed-upon repairs. The seller will also need to pay for any interest accrued to the date of any loan payoff, together with any lender payoff statement fees, loan reconveyance fees, and loan prepayment penalties.

Also chargeable to the seller usually will be seller upfront inspections and any repair work agreed upon with the buyer. The purchase of a home warranty may also be agreed upon. Typically, the seller would also be charged for a Geo/Environmental hazard disclosure.

Of course, if there are any liens or unpaid taxes, the seller would pay for those items. Property taxes are typically pro-rated (i.e., divided) as of close of escrow, as would be homeowner's dues, if any. If there are any unpaid bonds or assessments, the seller would typically pay for those.

Sellers are also usually charged for notary, courier, and recording fees, as well as escrow coordination fees and homeowner's association document fees.
Buyers

As far as buyers are concerned, typically in Santa Clara County they pay for loan-related title insurance, their share of the escrow fee, as well as fees for the appraisal, credit report, and notary fees.

Buyers usually also pay for recording fees for documents in the buyer's name, property condition inspections, and prorated property taxes. Other charges to buyers typically include wire transfer fees of funds (if any), homeowner's transfer fee, prorated homeowner association fees (if any), loan origination fees, and loan document or processing fees.

If there is an escrow account to be opened for buyer, the buyer typically is charged for prorated insurance and taxes, as well as interest on the new loan from the date of funding to 30 days prior to the first payment, any home warranty agreed upon with seller, and any buyer repair upgrades.

In Santa Clara county, buyers also generally pay for one-half of the city transfer tax, hazard insurance premium for the first year, courier fees, loan “points” and escrow coordination fees.

A real estate broker friend of mine tells me that none of the “typical” fees are chiseled in stone as to who pays what in our county, and that it is essential that both parties know who is responsible for what—in writing.

“Customary” fees also vary a lot from county to county. For example, a buyer in Fremont, which is in Alameda County, typically pays for the title policy and escrow fees, although the seller typically pays them in San Jose, which is in Santa Clara County.

Another important point to remember is that “as is” sales do not give a seller a blank check or release the seller from all liability suits. (This is a good topic for another day.)

Very early in the process, before anything is signed, your agent should be able to give you a pretty good estimate as to what sales costs to expect, based upon your particular situation, final sale price of your home, and other factors. Ask him or her to give you a written “Estimate of Sellers’ Costs” or similar document. Of course, make sure it is signed. Save it in a safe place for future reference.

I would take my time and do my homework. Feel free to ask questions, and please do not be shy. Once again, it's your home.

You might also want to pay a visit to your certified public accountant for any tax advice. This often is a crucial step in the process. You do not want surprises later on.

Good luck, Abby, with the sale of your home. I hope that all goes smoothly.

Donald J. DeVries
Almaden Valley


Donald J. DeVries is an attorney practicing law in Almaden Valley. If you would like him to answer your question in his next Almaden Times column, you can reach him by e-mail at don@almadenvalleylawyers.com, fax at (408) 268-6502, telephone at (408) 268-9500, or mail at, 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your matters are personal and private, so of course, he will not disclose your identity or any details about your situation. To view Almaden Times columns since 1986 visit www.almadenvalleylawyers.com. DeVries writes this column to provide you with general information about important legal matters affecting California residents—not to give you legal advice about your specific matter. No attorney-client relationship is created by these articles. The law is complex and constantly changing and varies from state to state. So you should consult an attorney before taking any action that would affect your personal or business matters.