Your Guide to Buyer Side Closing Costs
Understanding how to negotiate
fees with service providers
Below we outline typical closing costs a Los Angeles home buyer may encounter in a single family home purchase.
It's important to note that the information outlined below is an estimate. The formula I utilized is not exact. Escrow, Title and Lending companies set their own fees, which may vary from the calculations I use here. Additionally, each sale is an independent negotiation. Therefore, unique circumstances could be agreed to by both the buyer and seller, which may alter my closing cost guide.
Knowing how much your closings costs will be when purchasing real estate in Los Angeles is a necessary first step when assessing your purchasing power. It’s also crucial to know what may or may not be negotiable, so you have the best possible understanding when negotiating fees with service providers.
For example, if you are purchasing a 1 million dollar property and are planning to put a 20% down payment there will be additional fees, which are not part of the down payment. These fees are referred to as closing costs.
In my example below, I use a sales price of $1,000,000 with a loan amount of $800,000 and determined that closing costs may land somewhere between $15,000 – $18,000 or an additional 1.5% – 2% of the purchase price. Below I’ve outlined the approximate fees for each category.
Sales Price: $1,000,000
20% Down Payment: $200,000
Total Financing: $800,000
The base is usually $2.50 per thousand of the sales price:
Escrow Base: 1,000 X $2.50 = $2500
Loan Tie-In Fee: $500
Messenger Fees: $95
Notary Fee for Loan Contract Signing: $250
Title Insurance Fees:
The base is usually an average of $2.00 per thousand of your loan amount:
Title Base: 800 X $2.00 = $1600
Endorsements and Sub Escrow Fee: $90
Recording Fees: $125
**** In the calculations above, we use a per thousand metric. For a sales price of a million dollars, like in our example, the per thousand amount is 1,000. For the eight hundred thousand dollar loan amount above the per thousand amount is 800. You simply divide the loan amount or sales price by 1,000.
Property Tax Impound Account: $6,250
If you choose to impound your property taxes into your mortgage payment, the lender will create an impound account on your behalf and usually collect anywhere from 3-9 months of monthly tax payments at the close of escrow. The exact amounts your lender will require to establish your impound account may vary.
*** Please note this impound account is not a fee. Impounds are funds held for property tax payments made on your behalf by your lender.
The property tax rate in LA county is approximately 1.25% of the assessed value, which most of the time ends up being the purchase price.
1.25% X 1,000,000 = $12,500 per year in annual property taxes.
6-month impound account: $6250 (amount collected by the buyer’slender at the close of escrow)
Homeowners Insurance: $1200
Home Warranty if not paid by the seller: $650
These fees vary from lender to lender and sometimes are negotiable. There are many factors when it comes to potential lender fees. For example, the type of loan, rate, and terms of the mortgage may determine if you are charged any fees, origination charges or points. Some banks or brokers are flexible and can sometimes waive their underwriting or processing fees in order to win your business.
Origination Charge: 0-2% of the loan amount. I usually do not see an origination charge unless the buyer is paying down his or her interest rate or have a unique loan program, like a bank statement or hard money loan.
Underwriting and/or Processing Fee: $900 – $3000
Miscalleanos Fees could include credit report fee, admin fee, or other internal lender costs.
Total: $0 – $3000
Inspection & Appraisal Fees
These fees are not refundable and paid directly to the service provider at the time of inspection.
Appraisal Inspection: $500
General Home Inspection: $400
Sewer Line Inspection: $250 (may not be necessary if purchasing a condo)
Chimney Inspection: $250
Foundation Inspection: $250 (may not be necessary if purchasing a condo)
Roof Inspection: $250 (may not be necessary if purchasing a condo)
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