Sunshine, Sandy Beaches, and Closing Costs: Navigating Closing Costs in the Sunshine State

Hello, person of taste and distinction. This is a Tampa Bay Real Estate Insider Newsletter. Created to educate, inform, and empower you to take charge of your real estate or investment journey.

Ah, Florida. Land of sunshine, sandy beaches, and closing costs. That’s right, whether buying or selling a home in this tropical paradise, you’ll encounter that less glamorous aspect of real estate: closing costs.

So, what exactly are these costs, and how can you prepare for them?

What Are Closing Costs?

In simple terms, closing costs are fees not included in a property’s sales price, and they can add up quicker than you can say “Key Largo.”

How Much Are Closing Costs in Florida?

According to the latest from CoreLogic’s ClosingCorp, the average closing costs in Florida, including taxes, hover around 2.3% of the home’s sale price. Now, that might sound small, but let’s put it into perspective. If you buy a charming little bungalow in Tampa, Seminole Heights, let’s say, for $550,000, you’re looking at about $12,650 in closing costs. Meanwhile, a cozy spot in Tarpon Springs with a median price of $400,000 will set you back around $9,200 in closing costs.

For Buyers: What to Expect

Buying a home in Florida isn’t just about the down payment and the sales price. You’ll also need to budget for several closing costs:

1. Lender Fees: Your mortgage lender will charge an origination fee, which can be around 1% of your loan amount. On a $400,000 loan, that’s $4,000 right there.
2. Appraisal: To ensure the home is worth the price you’re paying, a professional appraisal will run you around $500, though it can be higher.
3. Insurance and Property Tax Escrow: You’ll need to pay a portion of homeowners insurance and property taxes upfront to protect your new residence and keep the tax man happy.
4. Home Inspection: While not required, a home inspection (around $500 and up) can save you from future headaches by uncovering potential issues before you finalize the purchase.
5. Prepaid Points: If you want a lower interest rate, you can buy points upfront. This will increase closing costs but save you money in the long run.

For Sellers: Your Share of the Costs

Sellers, don’t think you’re off the hook. You’ll have your own set of expenses to handle:

1. Commission Fees: Always negotiable real estate agent commissions typically amount to about 4-6% of the sale price, split between the buyer’s and seller’s agents. I will add that, yes, excellent service is expensive, but bad service costs a fortune.
2. Documentary Stamp Taxes: Also known as transfer taxes, these vary but are generally $0.70 per $100 of value, except in Miami-Dade, where rates differ. For a $400,000 sale, that’s $2,800.
3. Outstanding Property Taxes and HOA Dues: Any unpaid property taxes or HOA fees must be settled before you can transfer ownership.
4. Lawyer Fees and Concessions: Like buyers, you’ll benefit from having a lawyer. And if the buyer’s inspection reveals issues, you might be asked to cover some of their closing costs.
5. Pre-Listing Inspection and Wire Transfer Fees: A pre-listing inspection can help avoid surprise concessions. Plus, you’ll likely have to pay wire transfer fees to settle any existing mortgage.

Who Pays What in Florida?

In Florida, the distribution of closing costs can vary by county. Generally, sellers pay for the owner’s title insurance policy, except in Miami-Dade, Broward, Sarasota, and Collier counties, where the buyer often foots the bill.

But remember, everything is negotiable in real estate, and having a good REALTOR by your side to advise and negotiate for you can net you more money. Having a realtor who is actually good at crunching numbers is a great plus!

Negotiating Closing Costs

When negotiating closing costs in Florida, buyers and sellers should wear their best haggling hats – or their realtors should. Realtors in the Sunshine State can help smooth the process by ensuring fair play and transparency. Sellers can request that the buyer offset part of the closing costs, especially if the offer is under the asking price and overall market conditions allow that to be negotiated. On the other hand, sellers might offer to shoulder more costs to sweeten the deal in a buyer’s market. Remember, nearly everything in real estate is negotiable, and your realtor will guide you through the fine print, leveraging their local expertise to ensure both parties walk away with a smile.

“Due At Closing” Vendors and Optional Closing Cost

Optional closing costs can include renovation or cleaning expenses with a “due at closing” clause. For sellers who don’t have cash or don’t want to spend some money upfront, offering such options can make their property more attractive, particularly in a competitive market.

As always, it’s a numbers game, and these arrangements have some caveats, so I would be careful and ask for legal advice before entering such a deal.

Closing (pun intended)

So there you have it—a crash course on Florida’s closing costs.

One key takeaway for buyers and sellers is that when negotiating sales price and closing costs, it’s crucial to remember that a higher selling price means higher closing costs. The key is not to get too hung up on the sale price but to focus on what you actually net from the transaction. Don’t lose focus.

And hey, if you or somebody you know is ready to plunge into the world of real estate, why not give me a shout? I will help you craft a tailored strategy to sell, buy, or invest in real estate with confidence and less stress!

Until next time!