Closing Costs – Customary Doesn’t Mean Mandatory
Have you ever heard, “you have to pay that fee because it is customary in this area?” This can be told to buyers and sellers alike depending on the fee. While there are fees that are customarily paid by one party or the other they can still be negotiated. Customary doesn’t mean legally or mandatory.
In Florida, most Real Estate professionals use the contract provided by the Florida Association of Realtors and approved by the Florida BAR Association to make offers on residential properties. The contract addresses many issues that are negotiated between buyers and sellers and even spells out which closing costs are paid by each party. Please remember that this is a guide and not dictated by law.
Section 9. CLOSING COSTS; TITLE INSURANCE; SURVEY; HOME WARRANTY; SPECIAL ASSESSMENTS: on Page 3 of the FloridaRealtors/FloridaBar contract states which party pays the standard closing costs in a residential purchase transaction.
The most negotiated fee is the Owner’s Title Insurance policy, which covers the buyer in case there is a lien or claim on the property after closing. This fee is customarily paid by the buyer in Miami-Dade and Broward Counties, and for much of the rest of Florida is paid by the seller.
The promulgated rate of this insurance is .50% of the sale price plus $75.00 up to one million dollars and reduced for higher sale prices. If a property sells for $250,000 the Owner’s Title Insurance will come out to $1,512.50, which is no small fee.
(c) TITLE EVIDENCE AND INSURANCE sections (i), (ii), and (iii) will dictate which party will pay for the Owner’s Title Insurance Policy. In addition, it will dictate who will pay for the Title Search ($150) and the Municipal Lien Search ($150). So check the right box to save another $300.00.
- The Seller will designate the Closing Agent and pay for Owner’s Policy and Charges (but not including charges for closing services related to Buyer’s lender’s policy and endorsements and loan closing, which amounts shall be paid by Buyer to Closing Agent or such other provider(s) as Buyer may select:
This means that the Seller will pick the settlement agent and pay for the Owner’s Title Policy, and the buyer will pay the other fees charged by the settlement agent. The Seller will also be responsible the Municipal Lien Search.
- Buyer shall designate Closing Agent and pay for Owner’s Policy and Charges, Buyer shall pay the premium for Buyer’s lender’s policy and charges for closing services related to the lender’s policy, endorsements and loan closing, which amounts shall be paid by Buyer to Closing Agent or such other provider(s) as Buyer may select:
This means that the Buyer will pick the settlement agent and pay for the Owner’s Title Insurance policy and other charges for title. The buyer will be responsible for the Municipal Lien Search.
- [MIAMI-DADE/BROWARD REGIONAL PROVISION]: Seller shall furnish a copy of a prior owner’s policy of title insurance or other evidence of title and pay fees for: (A) a continuation or update of such title evidence, which is acceptable to Buyer’s title insurance underwriter for reissue of coverage;
- (B) tax search, and (C) municipal lien search. Buyer shall obtain and pay for post-Closing continuation and premium for Buyer’s owner’s policy, and if applicable, Buyer’s lender’s policy. Seller shall not be obligated to pay more than $____________ (if left blank, then $200.00) for abstract continuation or title search ordered or performed by Closing Agent.
The buyer will select the settlement agent and pay for the Owner’s Title Insurance policy along with other title costs. The Seller will pay for the Municipal Lien Search and the Title Search.
Selecting the correct boxes in this section can save thousands of dollars in fees, and these fees can be paid by either party regardless of local customs.
- ADDITIONAL TERMS: The buyer or seller can stipulate any other costs to be paid by the other party. Loan programs limit the amount a Seller can pay toward the Buyer’s closing costs, and the Seller is generally not allowed to pay toward the Buyer’s down payment for any loan programs.
The moral of this story is to take the sale price and other costs into consideration when either making or accepting an offer to purchase a property. Also make sure you read any agreement carefully and hire any attorney to represent you if you don’t understand any portion of the contract.