“Closing” is the term used for the completion of a real estate transaction. At closing, both the buyer and the seller settle the fees associated with the transaction, the mortgage note is issued, and certain fees are paid by each party. These fees are called closing costs.
When buying or selling a house, closing costs are necessary to settle the transaction between all the parties involved. These parties include the seller, the buyer, a title company, the escrow company, the lender and the real estate agent/s.
Read on to learn more about the closing costs in Orange County, California.
Normal Closing Costs for Seller and Buyer in Orange County, CA
Buyer Closing Costs in Orange County, CA
Buyer closing costs in Orange County, California average between 1% before the NAR settlement and now can be as high as 3.5% of the home purchase price with the buyer now having to pay the real estate agent out of their own funds vs the seller paying the fee. However, we have seen this multiple times since the new law has gone into effect and buyers are simply submitting their offers requesting that the seller pay the buyers fee. In some cases we are even asking for the seller to credit an additional 1% of the sales price to cover the remainder of the buyer fees explained below. It really comes down to the sellers net. So offer more and have the seller apply credits to your cost so they can be financed. Obviously if you are paying cash and elect to hire a realtor then it is best to pay them directly.
Escrow, title, appraisal, and underwriting fee make up the majority of the original 1% fee. Other portions of the fee not mentioned would be the home inspection fee. touched on later in the post and the points paid to buy down the loan. This is when a buyer would elect to have a lower interest rate. The buyer would chose to what is called buy down the rate. This fee is determined by the loan amount and not the purchase amount. This fee is also optional and not required. A scenario best to discuss with the lender who you hire. (I am also a licensed loan officer and can fully explain this on the phone)
Below are the typical closing costs for buyers in Orange County, CA
Mortgage Application Fee
This is a fee that lenders charge for processing the borrower’s loan application. This is usually charged at the start of the loan process.
Escrow Fees
Closing fees are charged for management of the funds and documents associated with the “closing of escrow” transaction. These are also called the escrow fees or settlement fees.
Appraisal Fee
This is the fee for the appraisal of the property. Mortgage lenders require home buyers to get the property appraised to determine its loan to value ratio (LTV) and how much loan the buyer can get.
Attorney Fees
The home buyer may choose to pay an attorney to assist with the closing.
Courier Fee
This is payment for documents that were sent or mailed using a courier or mail-type service. If the closing is done digitally, this fee will not be applicable.
Credit: Image by Mikhail Nilov | Pexels
Seller Closing Costs in Orange County, CA
The average closing costs for a seller in California amount to roughly 3.5% to 5.5% of the home’s final selling price. Depending on how the seller elects to pay for real estate agents commission.
Below are the typical closing costs for seller California, Orange County.
California Real Estate Commission
The seller’s is no longer responsible for both the commission of their agent and the buyer’s agent fees. The new laws that went into effect on August 17th after the NAR settlement do not obligate a seller to pay both agents commissions. All though there was never an obligation, but it was more so standard practice in the industry. This allowed buyers to more easily “afford” an agent when a majority of their funds were utilized for the down payment. So the Realtors commission were traditionally financed into the deal. This can still be the case today by requesting the seller to pay for the agreed buyers agent fee.
The new law require more transparency so that buyers understand what their agent is being paid in the transaction. Buyers can also elect to go directly with the listing agent and they can buy a home having the listing agent represent both sides or by representing themselves and elect to have no agent involved on their side of the transaction. Usually only the savvy buyers do this. IE investors or buyers who are also agents. Buyers can also elect to hire a lawyer to help with the contracts, however, the cost of an agent could most likely prove lower and an agent only gets paid if a home closes.(unlikely the case with an attorney)
The average total commission most home sellers were paying in California was 5% of the final selling price. This is sometimes less for higher-priced homes and has always been negotiable. Now sellers can elect to only pay their listing agent and either refuse to pay the buyers agent fee or request a higher offer to offset the buyers agent fee. They may also agree to pay a portion of the buyers fee. It really comes down to the offer terms.
The biggest change in all of this is that buyers agent compensation is no longer allowed to be advertised in the MLS. Buyers agent compensation must be agreed to in writing with the buyer and the buyer’s agent. That buyer’s agent compensation can then be requested that the seller pay it on the buyers’ behalf with an official offer.
Escrow Fees in California
Paid to the escrow company – a neutral third party between the seller and the buyer that holds the money until the home sale is final. They are responsible for ensuring that the buyer doesn’t receive the property and the seller doesn’t receive payment until everything is executed as agreed upon in the contract. Market rate is $500 plus $2 per $1,000 per side, but we have great escrow services that are much lower. Sometime as much as 50% lower depending on the purchase price
Title Insurance
Title insurance provides protection to the buyer against financial loss due to defects on the title. It also protects against liens that might emerge during or after the real estate transaction closes.
California Transfer Taxes
The seller is also responsible for city and county transfer taxes. These are also referred to as “documentary transfer taxes”. The cost of the county transfer tax in California is $1.10 for every $1,000 of the sale price, except for San Francisco County.
Miscellaneous Fees
Some of the miscellaneous fees include:
- Recording fee
- Notary fee
- HOA fee (if the property has an HOA)
- Any reports and/or inspections that are not paid upfront (i.e., home inspection fees)
Average Closing Costs and Realtor Fees in Orange County, CA
For buyers, average closing costs in Orange County, CA range from 2% to 5% of the home purchase price. For sellers, the average closing costs amount to roughly 5.35% of the home’s final selling price.
Realtors in Orange County, CA typically charge a standard percentage of 5% to 6%. But for high-priced properties, such as those that sell for over a million dollars, the commission may be more like 4% to 5%. The amount is negotiated between the seller and listing agent before a contract is signed.
Closing Costs Orange County, California: Cash Purchase Real Estate
Home buyers in Orange County (and other cities and counties in California) for the most part spend from 1% up to 2% of the contract price of the home in closing fees. What this means is that a high-priced home in Laguna Beach for $2 million could end up with higher closing costs starting near $20,000 and the same is true for lower priced homes.
A cash buyer is someone who uses their own funds to cover the full purchase price of the property. This means that the buyer is not taking out a loan. The funds could come from their savings, investments, or the sale of another property.
When paying cash for a home purchase, the buyer no longer needs to pay interest on loan and any loan related closing costs. There are no mortgage origination fees, appraisal fees, or other fees charged by lenders to assess buyers. Essentially, closing costs of Orange County cash real estate are lower than when a buyer is financing through a loan.
Average Refinance Closing Costs: Orange County, CA
According to Bankrate, refinancing a mortgage provides some benefits to the buyer, such as:
- Lowers the interest rate
- Shorten the loan term
- Converts equity into funds they need
However, this comes with a price tag. Just like the first mortgage, the buyer needs to consider the closing costs, which vary, depending on the size of the loan and the state and county where you live.
In general, the buyer can expect to pay 1% to 2% of the loan amount. For a $800,000 refinance, for example, closing costs could range from $8,000 to $16,000. Take in mind the largest portion of these cost will be escrow, title, appraisal, and underwriting fees. Usually those totals will be under 1%. When closing cost get north of 1% it is usually because the borrower is buying down the rate. A practice you will see more with the increased rates. Most lenders also have about a $1,000 underwriting fee. Take in mind the closing cost can be included as part of the loan so you can in a sense not pay closing cost. But this will increase your APR.(Usually only done in a refinance scenario)
Here are a few ways a buyer can lower the cost to refinance:
- Improve your credit score
- Compare mortgage offers and rates
- Negotiate closing costs
- Ask for fee waivers
- Consider buying mortgage points
- Go with your original title insurer
- Opt for a no-closing cost refinance
Typical Closing Costs for Seller: Orange County, CA
The list below enumerates the typical closing costs for seller Orange County, California:
- California Real Estate Commission
- Escrow Fees in California
- Title Insurance
- California Transfer Taxes
- HOA Doc and transfer fee
- Miscellaneous Fees
Typical Townhome Closing Costs in Orange County, California
Townhomes generally cost less than single-family homes and, since closing costs are usually a percentage of the home value, a buyer of a townhouse can expect to pay less in closing costs.
Here are upfront and ongoing costs a buyer of a townhouse will have to prepare for:
- Upfront costs
- Down payment
- Closing costs
- Ongoing costs
- Property taxes
- Homeowners insurance
- HOA fees, if applicable
- Some or all utility bills
- Interior and exterior maintenance
- Monthly mortgage payment
Conclusion
I hope you found this article helpful, but I know that closing costs can be overwhelming, especially for first-time buyers. If you’re considering selling or buying a house in the Orange County area, it’s best to have a reliable realtor by your side and I’ll be happy to help! I also have a loan license so can answer any questions in that regards.
Feel free to give me a call today at (949) 235-8614 and let’s start planning.
Frequently Asked Questions
Can a buyer pay seller closing costs in Orange County, California?
Yes. In Orange County, some closing costs are traditionally paid by the seller, while some are traditionally paid by the buyer. But these are not “rules” and all closing costs are negotiable.
What are the typical closing costs in Orange County, CA?
The typical buyer closing costs in Orange County, CA are mortgage application fee, closing fees, appraisal fee, escrow fees, title fees and courier fee. For sellers, typical closing costs are California real estate commission, escrow fees in California, title insurance, California transfer taxes, HOA doc and transfer fees and miscellaneous fees.
How can home buyers reduce their closing costs?
Home buyers can negotiate the closing costs with the seller. Depending on their agreement, the seller may agree to shoulder some or all of the buyer’s closing costs.
Are there any services you offer to help home buyers reduce their closing costs?
Definitely! Call me today at (949) 235-8614 so I can give you more information.
Are any other fees associated with buying a home in Orange County, CA?
Fees and charges associated with a home purchase in the OC are called closing costs. Beyond typical closing cost that add up to about 1% of the purchase price. (Escrow, title, appraisal, Underwriting fee) You may want to consider buying down the mortgage to get a better rate. You would need to also consider hiring a home inspector. Ranging from an entry level inspection of $400 to as much as $3,000 depending on the level of inspection desired and the size of the home. (With the higher end costs this would be with some added services, infrared plumbing lines, sewer scope, roof drone inspection, mold inspection etc.) If a more specialized inspection is required. For example a foundation inspection those can start at about $1500 and up depending on the scope of the inspection. We have a great group of specialists we can refer for all inspections needs.
What is the best way for home buyers to budget their closing costs?
Closely working with your realtor and lender will help you budget your closing costs and get the best deal from your real estate transaction.
Can you explain the closing costs in Orange County, CA?
For buyers in Orange County, CA, closing costs range from 1% to 2% of the home purchase price on average.(usually it will be under 1% anytime you are over 1% you are most likeley buying down the rate) For sellers, the average closing costs amount to roughly 5.5% of the home’s final selling price.
What are the most common fees associated with closing costs?
The common fees for buyers include the mortgage application fee, appraisal fee, rate reduction fees(if chosen) escrow and title fees, and notary fee. For sellers, the common fees and charges are California real estate commission, escrow fees in California, title insurance, California transfer taxes, HOA transfer and docs fees and miscellaneous fees(sometimes referred to as junk fees).
