MoCoRealEstate

Montgomery County Closing Costs and HUD1 Overview

October 1st, 2009 Categories: Buying, Selling

Perhaps the best way to understand the costs required to buy and sell a home is to understand the HUD1.  This is a standard two-page document that details all expenses and credits for a home sale.  This video walks through a HUD1 so you can understand the basics:

Closing Costs Estimates for Buyers

Here’s the top four expenses for home buyers in Montgomery County, Maryland:

1. Transfer and Recordation Taxes.  The state of Maryland and Montgomery County collect taxes that total between 2.2% and 2.5% of the total purchase price.  This is typically split between buyer and seller, so estimate this at 1.2% of the purchase price.
2. Title Insurance.  This insurance protects you and your mortgage provider from any defects in title which crop up after settlement.  The details of a title insurance is an article on it’s own.  I find that 0.4% of the purchase price is a good estimate.
3. Prepaids and Escrow.  Escrow accounts to pay for future property taxes and insurance will be setup.  The amount of property tax that you’ll pay at settlement depends on the timing of settlement.
4. Loan Charges.  I typically see around $700 for an appraisal and $600 for underwriting and document preparation.  However, this can vary widely by mortgage providers.  When comparing different loan programs, don’t simply compare the total closing costs estimated.  Item’s 1 – 3 are calculated by the settlement attorney and will be the same regardless of the mortgage provider.  Details of this item will be covered in a separate article.

A buyer will have other charges at settlement that often total between $1,000 and $2,000.

Closing Costs for Home Sellers

Costs for home sellers are more straight forward:

1. Brokerage Fees. This is the fee that compensates the listing and buyer agent to market, service and eventually close a sale.  The amount of the commission is negotiated between the broker and homeseller and is typically between 5 and 6% of the sales price.
2. Transfer and Recordation Taxes.  Assume this is split between the buyer and seller, so estimate 1.1 to 1.2% of the sales price .
3. Mortgage Payoffs.  All loans secured by the home’s title – including all home equity loans – are paid off at settlement.

Understanding costs associated with buying and selling in Montgomery County is essential when planning a sale.  Contact us anytime when planning your next move.

Posted by Bruce Lemieux

This entry was posted on Thursday, October 1st, 2009 at 2:27 pm and is filed under Buying, Selling. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Mike Long said at October 1st, 2009 at 4:18 pm

   The Internal Revenue Service recently reported the $8,000 first-time homebuyer tax credit has provided a tax benefit to more than 1.4 million people
   to date. In 2008 44% of all residential transactions were first time buyers. To date in 2009 56% of transactions have been first time buyers. Those are pretty powerful statistics. While I do agree with you that this shouldn’t push you to buy unless you truly do qualify…extending this may help us get out of the market we are in sooner rather than later…and I support that 100%.

   Hope you’re doing well!!

2. Bruce Lemieux said at October 1st, 2009 at 4:55 pm

   Hi Mike – I appreciate your thoughts on this. I know that I’m not on the same side of the fence as a lot of people. In my market, I believe that the combination of low prices from distress sales and rock-bottom interest rates are driving 1st time home buyers. I can’t help but think that the $8K credit is just a give-away. Of course, I could be wrong.

3. John C said at October 1st, 2009 at 8:23 pm

   cool zooming in and highlighting. it really helps you stay focused. nice work.

4. Bruce Lemieux said at October 2nd, 2009 at 4:21 am

   Thanks John. Reviewing a HUD1 is about as exciting as listening to Al Gore talk about climate change. I’m glad you made it through.

5. Joanna Woolley said at October 2nd, 2009 at 7:21 am

   Great subject to blog about – something we need to be able to inform our clients about, there always seem to be questions on this.
   Thank-you for the blog!

6. Bruce Lemieux said at October 2nd, 2009 at 7:38 am

   It’s easy to assume our clients know this stuff since we do it every day. Thanks for your comment.

7. Art Oswald said at October 8th, 2009 at 9:35 am

   this is really good but are you going to update if for the new HUD-1 coming out January 1, 2010?
   thanks

8. Bruce Lemieux said at October 8th, 2009 at 10:04 am

   Hi Art – thanks for the comment. Yes, my plan is to update the video once we start using the new HUD1. I haven’t seen a draft of it yet. I’m hoping that it’s consumer-friendly.

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