Closing costs for beachfront properties in Orange County, California, (and anywhere else, really) are an inevitable but often overlooked part of real estate transactions. But you simply must factor these costs into your calculations – on top of the down payment and other obvious upfront costs – in order to know what you’ll actually have to pay.
The good news is that they aren’t necessarily set in stone. Closing costs typically vary depending on the location of the property, the companies used, and, of course, the selling price of the property. In addition, some aspects of the costs are open to negotiation.
Whether you’re a buyer or a seller, then, you need to have some understanding of the costs involved in closing – otherwise, you may wind up paying far more at closing than you actually have to.
So let’s dig in . . .
Closing Costs Overview
“Closing costs are the expenses, over and above the property’s price, that buyers and sellers usually incur to complete a real estate transaction. . . . Homebuyers typically pay between 2% to 5% of the purchase price, but closing costs may be paid by either the seller or the buyer.”
Typically, these costs include such things as “loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees, and credit report charges. And, usually, there are some prepaid costs for those expenses that “recur over time, such as property taxes and homeowners’ insurance.”
At the final stage of the transaction – when money changes hands, dotted lines are signed, and the title is transferred from seller to buyer – is when closing costs actually kick in. There are two primary determining factors for these costs: location and the property’s assigned value.
Still, you don’t have to wait till the last minute when the transaction is being finalized to know exactly what these costs will be. For “[t]he lender is required by law to state these costs in a ‘good faith estimate’ within three days of a home loan application.”
So let’s now take a more in-depth look at the costs involved in closing for beachfront properties in Orange County, California.
Breakdown of the Costs
Also known as the settlement, closing is simply the process of transferring ownership from seller to buyer. That sounds simple enough on the face of it, but closing can actually be pretty bewildering and overwhelming, especially when you consider the mountain of paperwork and legal intricacies involved. And then there’s that momentous instant – painful for the buyer, but exhilarating for the seller – when that big check changes hands.
The most bewildering aspect of closing for many people revolves around the many associated fees. A lot of these fees remain a mystery to buyers who simply hand over thousands of dollars without actually knowing what they’re paying for.
So let’s try to clear up a little of that mystery by examining the primary and most common closing fees for both buyers and sellers, the fees that are both mortgage-related and government-imposed.
Appraisal Fee
Pays for the lender-required property appraisal (though it may have been paid at the initial stage of the loan-application process)
Credit-report Fee
Covers the lender’s cost of obtaining your credit report (which cost also may have been paid during the loan-application instead)
Loan-origination Fee
Cover the lender’s cost of processing your mortgage loan and is typically about 1% of the total mortgage
Loan Discount
A one-time fee charged if you elect to pay points to lower the interest rate (each point equaling 1% of the total loan amount)
Title-insurance Fees
Fees that typically cover the following costs: title search, title examination, title insurance, document preparation, and some associated miscellaneous costs
PMI Premium
A fee for mortgage insurance typically required by lenders when you pay less than 20% down and designed to protect the lender in case of default and/or foreclosure
Prepaid-interest Fee
Covers the mortgage interest payment(s) from the date of purchase to the date of the first mortgage payment (which means purchasing a home early in a month will require a higher prepaid-interest fee)
Escrow Accounts
An account initiated by the lender (in applicable locations) to hold funds for future recurring expenses such as property taxes and homeowners insurance – for property taxes, typically an amount to cover two months over the number of the year’s months that have elapsed and for insurance, at least a year in advance plus two months
Recording Fees and Transfer Taxes
Charged in most states to defray the costs of recording the pertinent purchase documents and transferring actual ownership of the property’s
Southern California Costs of Closing
Now when we come to Southern California, here’s what we find regarding the costs of closing . . .
In California, especially when you factor in beachfront properties in Orange County, these costs are the sixth-highest nationwide, coming in behind only Washington, DC, New York, Maryland, Delaware, and Pennsylvania. The high rate of closing costs in this are is chiefly owing to the fact that houses and land make up the bulk of the market and the large amount of high-end real estate.
Typical closing costs in this area, percentage-wise, are:
- For buyers, approximately 2% to 3% of the sale price
- For sellers, around 5% to 9% of the sale price
Now for a little math . . .
Say you purchase a house for $800,000 (low for Orange County beachfront property). Your total costs for closing will come in between $16,000 and $24,000. And this includes the one-off fees paid during closing to finalize the transaction, as well as portions of some recurring costs that have to be paid over the course of homeownership (as we indicated above) such as property taxes and insurance.
An Example – Laguna Beach
It should be pretty apparent, then, that the amount of your costs at closing will be in large part determined by the sale price of the property. So let’s take a look at property values in Laguna Beach, California, to help you get a handle on these costs for beachfront properties in Orange County.
Typical home values in Laguna Beach come in at a little over $2,500,000, which is up 9.5% from a year ago. So if we calculate using the low end of closing-cost percentages, here’s what we get:
- Buyers pay $50,000
- Sellers pay $125,000
But bear in mind that these relatively high closing costs are offset by other factors. If you’re buying beachfront real estate in Orange County, you’ll get an extraordinary property right on some of the world’s most desirable beaches with incomparable views and the tranquility of ocean waves.
Some Good News
Besides all the perks of beachfront property, there’s more good news in all this . . .
Closing costs can in fact be negotiated. “It’s not just the ‘Services You Can Shop For’ section of the Loan Estimate; you can substantially whittle down the charges you pay by asking questions – and most importantly, by comparing fees and service charges from more than one lender.”
So you can, especially if you’re a buyer, potentially reduce these costs quite a bit by:
- Knowing where to find the savings
- Comparing lenders’ “Loan Estimate” forms
- Pushing back on lender fees
- Shopping around for the best deal on title and settlement services
- Asking the seller to pay a portion of the closing costs
- Going with a “no-closing costs” mortgage
- Signing mortgage loan papers at or near the end of the month
- Finding out about discounts and rebates
Of course, the best way to lower your closing costs is to negotiate a lower sale price. But that usually requires the services and negotiating expertise of a top-notch local real estate agent.
Why You Need a Good Orange County Agent . . .
Closing costs for Orange County beachfront properties can indeed add up to a lot of money, but, as we’ve just shown, there are several strategies to whittle down those costs. It takes, though, a good bit of industry knowledge, plenty of experience in local markets, and honed skills.
And that’s precisely why you need an experienced Orange County real estate agent in your corner.
Really, you shouldn’t pay more than you have to by trying to go it alone.
