What Are Closing Costs When Selling a Home?

Many, many times I've received a closing statement the day before I have a closing scheduled to buy or to sell a home, since I do both in the course of my business as a real estate investor. The first thing I have to say is that reviewing your preliminary closing statement is a very, very important activity. A closing statement is also referred to as a HUD-1 form. What I am telling you here is to close the door, turn off all electronics and put your full attention on the legal-sized piece of paper that directs where all the funds will be allocated at the closing table when you sell a home. Pick up the phone and call the person who prepared the closing statement if there is anything you do not understand. You should NOT be seeing your closing statement for the first time when you sit down at the closing table to buy or sell a home. If that occurs, excuse yourself to another room in the building, and take the person who is closing the transaction with you. Ask your questions and do not leave the private room until you understand everything on that piece of paper thoroughly because it directly affects how much money comes out of or goes into your pocket. That is when you are ready to return to the closing table.

OK, once you understand everything on the closing statement, you will have a much better understanding of the term "closing costs." If you search for a definition of closing costs on the web you will see that there are two types of closing costs called "non-recurring closing costs" and "pre-paid items." These terms simply define the things that you pay only once as a result of this sale transaction and the things you have been or will be paying as an owner of the home.

The reality is that somebody has to prepare the closing statement that reflects many factors, some of which are not known exactly until the day before or the day of closing. But generally, expenses such as a property inspection, a real estate commission, and property taxes prorated to the exact date of possession and utility bills prorated to the exact date of possession can be calculated in advance of closing for the purpose of preparing a closing statement.

Closing costs are the expenses of closing a real estate transaction, and most people discover that the list is surprisingly long when they sell a home or buy a home. One way to lessen the shock is to get a blank copy of the HUD-1 form online or from your real estate agent or title company closing agent so that you are at least familiar with the form before you see one filled out for your transaction. And another suggestion is to ask to see actual closing statements (with the names and address blanked out if necessary) so that you can see some numbers in action. That way, you'll have a much better working understanding of closing costs before your important closing date.


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