The hidden closing costs of a Vermont real estate transaction

For those who are looking to purchase or sell their home, it can be difficult to discern  the exact cost of closing on such a deal.  Although the purchase price agreed to in the Vermont real estate transaction puts the parties to the deal in the ballpark of the actual overall cost, this ballpark can vary by thousands of dollars depending on a multitude of factors.  Learning about the potential factors prior to entering into a contract can be a valuable lesson in understanding what the bottom line cost will be when the parties meet at the closing table.

1. Title Insurance: If a purchaser of Vermont real estate is borrowing some of the purchase price for the transaction, it is likely that the bank will require that their interest is covered by a lender’s title policy.  Even if a bank is not involved, it may be a wise idea to insure title through the purchase of an owner’s policy.  The cost of title insurance is dependent on the amount of money being borrowed and/or the overall purchase price of the real estate.  To get a general idea of the cost click here for a rate calculator.
2. Insurance Premiums:  The cost of insurance is once again dependent on the size of the mortgage and factors related to the property.  Most banks require a policy that covers the replacement value of the home.  Thus, in insuring Vermont real estate, the total amount covered will likely exceed the purchase price.  Is the property in a flood plane?  This is a very important designation to research prior to contract formation, as flood insurance can significantly increase the overall monthly costs required to purchase the property.
3. Recording Fees: Town clerk’s customarily charge $10 per page for recording mortgages, deeds, property transfer returns and other documents surrounding the transfer of property.  Depending on the complexity of the transaction, these fees can result in several hundred dollars being added to the closing costs.
4. Loan Origination and Processing Fees:  Banks need to be compensated for drawing up the paperwork and conducting their due diligence in processing a mortgage application.  This cost can be upwards of several hundred dollars which will be expected to be paid out of closing proceeds.
5. Attorneys’ Fees:  In most transactions, both the sellers and purchasers are represented by attorneys who assist in the transfer.  These fees in most cases are paid at closing and are either added to the overall costs to the purchaser or deducted from the seller’s expected proceeds.
6. Title Search Fees:  In most cases a title search of the property to ensure marketable title is available for the purchaser is required.  This not only informs the purchaser of what issues may surround the property itself, such as easements, restrictions on the use of the land and permit violations, but is also a requirement of any purchaser that is required or desires to purchase title insurance.
7. Municipal and State Taxes:  As part of the transaction, all municipal taxes need to be caught up at closing.  Many banks also require that an entire year of taxes be paid at closing.  Also, the State of Vermont imposes a “Property Transfer Tax” of 1.45% of the purchase price, which will need to be paid at closing.
8. Real Estate Agent Commission:  A seller in many cases enlists the assistance of a real estate agent to market their property.  It is customary for a real estate agent to collect upwards of 6% of the purchase price as a commission on their work.

The above list is not an exhaustive in detailing all the potential costs of a Vermont real estate closing.  However, it gives the parties to a real estate contract a general idea of what to expect.  Simply put, running calculations based on these figures prior to entering into a contract may assist all parties in ensuring that they are not surprised when they sit at the closing table and see exactly where all the funds are going and what the actual cost for conducting this transaction will be.

 

The above information should not in any way be construed as legal advice.  Before entering into any real estate contract it is important to consult an attorney in order to understand all the complexities of the transaction.