What are Closing Costs?
Closing costs are the fees and expenses associated with finalizing a real estate transaction. They include a wide range of items, such as loan origination fees, appraisal fees, title insurance, escrow fees, and more. Closing costs vary depending on the property’s price, location, and the specific services required, but they typically range from 2% to 5% of the home’s purchase price.
Who Pays Closing Costs in Tennessee?
In Tennessee, both the buyer and the seller are responsible for paying closing costs. However, the specific costs each party is responsible for can vary depending on the terms of the purchase agreement. It’s not uncommon for buyers and sellers to negotiate who will cover certain expenses.
How Much are Closing Costs for Sellers in Tennessee
Sellers in Tennessee can expect to pay several closing costs. Here’s a breakdown of some of the most common ones:
REALTOR Fee
The REALTOR fee, also known as the real estate commission, is typically the largest closing cost for sellers. In Tennessee, the average commission rate is approximately 5% to 6% of the home’s sale price. This fee is split between the buyer’s and seller’s agents.
Recording Fee
Recording fees are charged by the county to record the new deed and transfer ownership of the property. In Tennessee, these fees vary by county but generally range from $100 to $300.
Escrow Fee
The escrow fee covers the cost of a third party holding and managing the funds during the transaction. These fees typically range from $500 to $1,500, depending on the price of the property and the services provided by the escrow company.
Home Inspection Fee
While not always required for sellers, a pre-listing home inspection can help identify any potential issues with the property before putting it on the market. The cost of a home inspection varies depending on the size of the property and the inspector’s rates but usually ranges from $300 to $500.
How Much are Closing Costs for Buyers in Tennessee
Buyers in Tennessee also face several closing costs, which may include:
- Loan origination fees: These fees cover the costs of processing the mortgage application and typically range from 0.5% to 1% of the loan amount.
- Appraisal fees: An appraisal fee is required to determine the property’s value and usually ranges from $300 to $600.
- Title insurance and search fees: These fees protect the buyer and lender from potential title disputes and typically cost between $500 and $1,500.
- Homeowners insurance: Buyers are required to pay the first year’s premium at closing, with the cost depending on the property’s value and chosen coverage.
- Property taxes: Buyers may be responsible for paying a portion of the property taxes at closing, depending on the time of year and local tax
How are Closing Costs Calculated?
Closing costs are determined by various factors, including the property’s purchase price, location, and the specific services required. Typically, closing costs range from 2% to 5% of the home’s purchase price. Some of the fees that contribute to closing costs are fixed, while others are based on a percentage of the loan amount or the property’s value.
Lenders are required to provide borrowers with a Loan Estimate within three business days of receiving a mortgage application. This document provides an itemized list of estimated closing costs, allowing borrowers to understand the fees involved and compare offers from different lenders.
Closing Costs in Tennessee for Refinance
When refinancing a mortgage in Tennessee, borrowers should also expect to pay closing costs. While these costs may vary, they typically include the following:
- Loan origination fees: These fees cover the costs of processing the refinance application and usually range from 0.5% to 1% of the loan amount.
- Appraisal fees: A new appraisal may be required for refinancing, with fees typically ranging from $300 to $600.
- Title insurance and search fees: These fees protect the borrower and lender from potential title disputes and generally cost between $500 and $1,500.
- Recording fees: These fees are charged by the county to record the new mortgage and vary by county but generally range from $100 to $300.
Refinancing closing costs in Tennessee can range from 2% to 3% of the loan amount. Borrowers should weigh the potential savings from refinancing against the closing costs to determine if it’s a financially sound decision.
Junk Closing Costs to Watch Out For
When reviewing closing costs, be vigilant for unnecessary or excessive fees, often referred to as “junk” closing costs. These may include:
- Excessive courier fees: While courier fees may be necessary, some lenders may charge more than the actual cost of the service.
- Duplicate fees: Watch out for fees that seem to cover the same service, such as “processing” and “administration” fees.
- Excessive underwriting fees: Underwriting fees should be included in the loan origination fee, but some lenders may charge an additional fee.
To avoid junk closing costs, carefully review the Loan Estimate provided by the lender and ask for clarification on any unclear or suspicious fees. Additionally, consider comparing Loan Estimates from multiple lenders to ensure you’re getting the best deal possible.
How Much are Closing Costs in Tennessee?
Closing costs in Tennessee can have a significant impact on the overall expenses associated with buying or selling a home. For buyers, it is advisable to save between 2% and 5% of the home’s value to cover closing costs. On the other hand, sellers can expect to pay approximately 0.9% of the home’s final sale price in closing costs.
According to data from 2022, the average closing cost in Tennessee, including taxes, is around $3,790.39. This amount represents approximately 1.9% of the home sale price. It’s important to note that the specific closing costs can vary based on the location and the price of the property.
In Tennessee, most homes fall within the price range of $200,000 to $300,000. As the price of the home increases, so do the closing costs, particularly for sellers who are responsible for paying the real estate commission. The real estate commission typically ranges from 5% to 6% of the final sale price.
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