What are Closing Costs in Philadelphia?
Closing costs in Philadelphia are broken down into a few different categories. Many different costs charged when you sell or buy a house. Unfortunately, buyers tend to pay more in closing costs than sellers do. Some of the common charges you would see on your HUD statement or Alta (a breakdown of closing cost charges):
- Title fees
- Transfer tax
- Appraisal & Inspection fees
- Property tax
- Agent fees
Usually, each title company you use to close on your home has different amounts owed for various things. Typically, the title company handles all fees and expenses at closing. Therefore, costs consist of things such as notary fees. Most of the time, a title company can notarize documents and charge you for it. However, they will also charge you a flat fee for their time. Additionally, any money needed to transfer and provide title insurance. This gives you a clean and marketable title for any liens or judgments.
How Much Are Closing Costs in PA?
In each state, closing costs could carry a different amount. For instance, pay around 5% to 6% of the home value in transfer tax in Pennsylvania. So, if you’re selling in Philadelphia specifically, expect to pay higher closing costs. Compared to the rest of the state, the transfer tax is higher. Therefore, Philadelphia charges an additional 3% transfer tax on top of the 1% the state charges. In New Jersey, closing costs are around 2% to 5% of the purchase price. Each state and local municipality has its transfer tax charges.
Appraisal and inspection fees are something that a buyer will have to pay. In addition, inspections are widespread when buying a home. It lets the buyer know of home defects, such as the roof, plumbing, heating, cooling, electrical, etc. Your average inspection company may charge $200 to $600, depending on the size of the home. The appraisal’s done on a house, so the mortgage company knows the home’s value before you purchase. Appraisal fees wrapped up with loan costs at closing.
Understanding Closing Costs in Philadelphia Pennsylvania
Property tax, another cost you will be looking at on your closing statement. Furthermore, the Philadelphia real estate tax is usually prorated. Depending on the time of year, if the seller is paid up on their taxes, it could be a significant credit back to them. Finding the prorated taxes involves dividing the total annual property tax amount by the number of days in the tax year. In addition, the daily rate multiplied by the days each party owned the property during the tax year.
Agent fees are another essential closing cost associated with selling a property. Typically, agents charge the seller 5% to 6%, depending on what was agreed upon when signing the listing agreement. But sometimes, a seller is unwilling to offer buyers’ agent compensation. Then, the buyer’s agent may request some payment from the seller. However, it depends on what may be agreed upon between the parties.
How Can I Lower My Closing Costs in Philadelphia?
There are several different ways to lower your closing cost. First, speak with your lender. Many mortgage companies offer ways for people to pay down their loans and upfront costs. Another way you can lower costs as a buyer is by waiving home inspections. Therefore, it would cost less money. However, not recommended, another way to save cash before closing.
You can save money by negotiating transfer tax. Sometimes, a seller will cover all closing costs and transfer tax for a buyer. You may also talk with your agent about the seller’s concession. It is when a buyer requests some of the proceeds of the sale to go towards the buyer’s closing costs. You can ask for a percentage or an exact amount. You can also lower your down payment and close with the mortgage company.
Who Pays Closing Costs?
As mentioned, all the closing costs become associated with selling or buying a home. Most of the time, the price falls on the buyer. Even though costs such as transfer tax and agent commission can be negotiated, we will break down below how the closing costs in Philadelphia are usually divided.
Typical seller closing costs in Philadelphia:
- Half of the transfer tax (In Philadelphia, 2.2% typically)
- Agent commission 5% to 6%
- Title fees associated with the title company
- Seller concession (if offered by the seller)
Typical buyer closing cost:
- Fees associated with the mortgage lender
- Inspection and Appraisal cost
- Agent commission (if not offered by seller)
- Transfer tax (in Philadelphia, typically 2.2%)
