Closing costs are a necessary but often forgotten part of every real estate deal that both buyers and sellers must consider when calculating their total expenses or profits. Let’s break down how much closing costs are in Florida and look at who usually pays for those costs.
What Are Closing Costs?
In short, closing costs are the final money transfers when a home is bought or traded from one person to another. It represents the consummation of a home sale, accompanies the final signing of documents, and causes mortgage funds to be released. It’s the last step on the long road to buying or selling a house!
Who Pays Closing Costs in Florida?
Both buyers and sellers are responsible for several closing costs and fees. These are classically separated by role (although the details can be arranged differently depending on the relationship between the buyer and seller). In general, a seller’s closing costs usually relate to real estate commissions and deed transfers. A buyer’s closing costs often focus on mortgage fees and payments.
How Much Are Closing Costs in Florida?
The actual closing costs will depend heavily on the property cost, associated fees, whether or not a real estate agent was involved, and more. However, a good rule of thumb is to assume that:
- The seller will pay between 5% and 10% of the overall home’s sale price, largely due to real estate commission which can be as high as 6%
- The buyer will pay between 2% and 4% of their total price for closing costs alone
This means that sellers usually pay more of the closing costs than buyers, but this is not a hard and fast rule. Again, it depends on the specifics of the deal.
Florida Seller’s Closing Costs
Closing costs for sellers in Florida are typically going to run between 5-10% of the purchase price. The largest Florida seller's closing cost is the real estate commission, which is typically between 5-6%. A great way to save on the real estate commission in Florida is to hire a transaction broker. Here's a breakdown of some of the most common closing costs that a seller in Florida may have to pay for to complete a real estate deal.
- Outstanding amounts – if there are any outstanding amounts still owed on the property, including things like utility bills or homeowner’s association fees, these will likely be paid by the seller.
- Real estate agent commission – this is usually between 5% and 6% of the sales price, and it’s the fee for the real estate agent connecting a seller to a buyer. However, prices in Florida can also drop to as low as 2.5% or so depending on the realtor you contact.
- Settlement fees – these usually amount to between $300 and $600 and are dictated by the state. Florida doesn’t require an attorney to be present at the closing of a real estate deal, so you don’t need to necessarily pay attorney fees.
- Title search fees – usually between $100 and $200. This covers the cost associated with checking a home’s ownership history to make sure there aren’t any title complications.
- Prorated property taxes – in Florida, property taxes are paid in arrears, meaning a seller owes property taxes for however much of the taxable year they owned the house, and that amount will also be prorated.
- HOA and municipal lien search – these costs are between $200 and $700 in total. The former covers fees to confirm that the home and current owner is in good standing with the homeowner’s association, while the latter covers a search for any unrecorded property issues, like expired permits or code violations.
- Transfer tax/documentary stamp fees – this price can vary dramatically, and it’s the cost paid to the local county when the deed transfer is recorded. For all Florida counties except for Miami-Dade, this is $.70 per $100 paid for the property. For Miami-Dade County, it’s $.60 per $100 for single-family homes, plus a surcharge for other property types
- Title insurance – this last fee is decided by the state and is based on the overall purchase price. This fee is negotiable, and the buyer sometimes pays it instead of the closer, depending on the deal.
Florida Buyer’s Closing Costs
Typically, the buyer closing costs in Florida will add up to around 2-4% of the purchase price. Florida buyer closing costs include appraisal fees, loan origination fees, inspection fees, and recording fees. Here's an overview of the closing costs you can expect to pay when buying a home in Florida.
- Appraisal fees – these are usually between $300 and $500. This determines the value of the home for loan purposes.
- Optional survey fees – normally between $300 and $500, some lenders require surveys of a property before they’ll release a loan to a buyer. Costs can vary based on home location and size.
- Loan origination fees – these are between 0.5% and 1.5% of the sales price. They cover all associated loan fees, such as prepaid interest, application fees, and loan origination fees.
- Credit report costs – at times, lenders charge a fee to check the buyer’s credit score and history.
- Inspection fees – often between $300 and $600, this covers the costs associated with investigating a home before the deal is closed. Some companies can do an inspection for cheap.
- Recording fees – Florida counties incur a fee for registering the sale and transfer of the property.
Ultimately, closing costs in Florida can add a significant amount of the total price for a home for both the buyer and seller and should always be anticipated before closing a deal. However, keep in mind that very few elements of the closing costs are set in stone – buyers and sellers can negotiate with one another to determine who pays for what if the situation calls for some modifications to the above outline.
For instance, many sellers consider covering the closing costs for a buyer (either in full or just a percentage) in order to secure a sale. That’s because the buyer still pays the bulk of the transaction costs – they’re the one paying for the home after all! Savvy sellers will cover these closing costs to guarantee a sale by a certain time or help buyers stay within their own budget.
Regardless, Florida closing costs are easy to understand once you break them down. Be sure to go over any questions you have regarding closing costs with your realtor to avoid any unanticipated surprises. Good luck with your home sale or purchase!