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When buying or selling a home, who pays for what?

In buying or selling your San Diego area home, you will face a series of expenses — many minor, some not so minor — that you may not be entirely familiar with or expect. Your first instinct may be to see if the other party (the seller if you are buying; the buyer if you are selling) should be paying the bill, not you. It's important to know who pays for what, before you begin the real estate transaction. 

Appraisal

The buyer of a San Diego home wants to know its true value, because the buyer is asking a lender for the money to acquire the home. The lender will obligate the buyer to pay for appraisals.

In some rare cases, such as a second appraisal on an FHA-insured mortgage, the seller or lender pays for the appraisal.

Inspection

Getting a home inspection is always a good idea, so the buyer knows the condition of a San Diego property, its systems, and the structure itself. This inspection benefits the buyer only, but the seller gets a sort of early warning that something in the home is not quite in sellable condition.

The buyer usually pays for the inspection. If something arises from the inspection report — a missing overflow pipe and valve on a hot water heater, loose flashing around a chimney — the seller can either pay for repairs or offer to lower the home selling price to reflect the needed repair cost.

A buyer could push to have the home inspection’s cost absorbed by the seller as one of a group of “concessions,” but these are usually limited to a small percentage of the selling price.

Repairs

As the experts at BankRate point out, everything in a real estate transaction is negotiable, depending on how hard one side wants to press a case. San Diego home sellers see no reason to pay for repairs to homes they will not occupy; buyers see no reason to buy homes with noted flaws. This is why it's important to work with trained realtors to help with the negotiation process. 

Repairs are usually negotiated between the two parties. If the inspection report reveals substantial, structural issues, the buyer can threaten to walk away if the seller does not cover repair costs. If repairs are cosmetic or do not affect the function of major systems, the seller may simply offer to knock a little off the price tag, but leave the repairs to the buyer.

The place to settle this is in a contract, in which both sides spell out the point of the inspection report:

  1. Informational only — neither side is obligated to make repairs or adjust pricing
  2. Transactional — The report is shared with the seller after the buyer sees it; it stipulates repairs or cost adjustments to be made

Closing Costs

The whole collection of fees charged at closing are not really a single line item, but are grouped together because neither buyer nor seller sees them until closing. These fees include all sorts of services:

  • Title search costs
  • Lender’s title insurance — Protecting the lender, not the buyer, should title conflicts arise
  • Attorney fees
  • Land survey fees
  • Credit report charges
  • Loan origination fees
  • Recording fees
  • Escrow deposit
  • Underwriting

Everything we just listed for buying your San Diego investment property or dream home are costs borne by the buyer. They will usually account for about six percent of the home’s selling price, but many are not pegged to the transaction amount; they are standard costs for all real estate listings. The office of the San Diego Assessor/Recorder/County Clerk charges a modest $18 for the first page of all titles associated with the Real Estate Fraud Fee Standard, for example, regardless of home value. 

The San Diego home seller, though, pays for services, too:

  • Real estate agents’ commission — Around six percent of sales price, this commission is split between the two agents or Realtors
  • Transfer taxes
  • Home warranty premiums
  • Title insurance premiums — Protecting the buyer, not the lender, if a title issue comes to the surface after the sale
  • HOA — If buying a San Diego condo, the home buyer may have to pay dues after the sale but before closing; the seller typically reimburses the buyer for those months

Some San Diego home sellers add a buyer’s warranty, providing peace of mind against first-year issues that an inspection report may not have caught. Costs for such a warranty program are paid by the home seller.

If In Doubt

If you are unsure who will bear the costs of a given service or process, ask questions. Your San Diego real estate professional is working for you; you are entitled to clear, understandable answers. Some costs are expected to be negotiated; some are borne by the seller, and some are traditionally the buyer's to pay. Do not agree to a service if you are unclear, before the service is rendered, what part of the service will be your financial responsibility. 

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