Who Pays Closing Costs in Florida? A Buyer-and-Seller Guide

How much are the “closing costs,” and who pays them? These are among the most frequently-asked questions I get from buyers and sellers. Unfortunately, there is not an easy-to-remember, one-size-fits-all answer.

There is a lot of information on the internet about national averages for buyer’s and seller’s closing costs. Some of these figures can be helpful to have in your back pocket, but I wouldn’t rely on these alone. There are too many variables in every real estate transaction that could alter the final closing statement.

Some of these factors include the following:

• the county where the home is located
• the type of property, such as a condominium, villa, or house
• the specifics of the purchase/sale contract
• buyer’s financing
• any seller-provided credits
• Homeowner’s association considerations
• fees from the company completing the closing

In short, “buyer beware, beware of all costs.” My role is to keep my clients apprised of all of the potential costs they may be responsible for and help them better understand how these numbers can change. By the time they receive the final closing statement, it should be nothing but confirmation of all of the moving parts we’ve been tracking throughout the transaction. Nothing should come as a surprise.

Keep four buyer expenses separate

Number	What it means
Down payment	The buyer’s portion of the price that is not financed
Closing costs	Loan, title, settlement, recording, transfer, and other transaction charges
Prepaids and escrow funding	Money collected for interest, insurance, taxes, and an initial escrow cushion when applicable
Cash to close	The final amount the buyer provides after deposits, credits, prorations, and financing are applied

In my experience, the #1 source of confusion for buyers is differentiating between (1) their down payment, (2) their closing costs, (3) any prepaid/escrow items they’re required to fund at closing, and (4) their final net “cash to close” amount. It’s not uncommon for buyers to hear a ballpark figure about their potential cash-to-close number early on, only to have their eyes widen in disbelief when they see the final amount at closing. Understanding these 4 different buyer’s expenses will help you better anticipate what you’ll be paying when it comes down to it.

Compare the Loan Estimate and Closing Disclosure

Once the buyer’s mortgage application has been accepted, the buyer’s lender will provide the buyer with a document called a Loan Estimate. This document breaks down the buyer’s anticipated expenses. It’s critical that buyers compare their final Closing Disclosure against their original Loan Estimate to make sure they understand how/why the final figures are different.

Know the additional costs of a condominium

As an agent who works in the condo-heavy Miami/Miami Beach market, I often field questions about additional costs that may be associated with a condominium. Some of the potential costs a buyer may be responsible for when purchasing a condo include:

• application fees
• estoppel fees/information
• regular condo dues
• condo transfer fees
• move-in deposit
• special assessments

Condos have their own idiosyncrasies, so it is helpful to hire an agent who has condo experience and understands how to order a condo’s lien search and other requirements, and has a working knowledge of the building’s condo association.

Reconcile cash to close when anything changes

Remember that “cash to close” is the buyer’s bottom-line figure, and this number fluctuates if any of the components used to calculate it changes. A few of the reasons a buyer’s cash to close might change could be due to:

• a change in sales price
• a change in loan terms
• additional seller-provided closing cost credits
• a change in the closing date
• a change in buyer’s homeowners’ insurance premium

At first glance, a lender-provided cash-to-close worksheet is helpful, but buyers should not simply assume that the worksheet will be an accurate depiction of their final cash to close amount. Instead, if anything changes during the course of the transaction, buyers should recalculate their new cash to close. If the buyer is purchasing with cash, there will not be lender-provided costs; however, buyers should budget for title charges, closing fees, condo association costs if applicable, transfer taxes, document recording fees, etc.

Why one percentage is not enough

• the amount of your down payment; a 20% down payment doesn’t mean you’ll be paying 20% of the sale price in cash, but more.
• whether you’re getting a loan or paying all-cash, which saves on loan-origination fees
• the location and type of the property; condos in Miami and Miami Beach come with association application fees, special assessments, etc.
• any other costs you’ve already paid for: inspections, appraisals, association applications…etc. These items will not show up as paid on your Closing Disclosure if they’ve already been paid for before closing, so don’t think that closing costs are low if you can’t find them.
• the negotiation on who pays for what

In Florida we have a few rules regarding transfer-related taxes, credits, and costs. For example, our rules for the documentary-stamp tax are different in Miami-Dade County than in the rest of the state. There are taxes on the deed, the promissory note, the mortgage, and there is a line for everything.

• the amount of seller’s credits you’ve been able to negotiate and how they’ll affect the sale price, the monthly payment and your cash-to-close. Seller’s credits are limited by the terms of the contract, your financing, and the property’s appraisal. It’s important to compare offers with credits to see how they affect the sale price, monthly payment and your cash-to-close.
• the amount of deposits made on behalf of each side
• what needs to be paid-off, paid-in-full, escrowed, pre-paid…etc.
• the closing or title fees
• the commissions
• the payoff of the seller’s existing mortgage
• the seller’s share of any transfer-related taxes
• any credits being given to the buyer
• any unpaid association dues or special assessments for the seller’s unit
• any agreed-upon repairs, prorations or concessions

If you’re buying or selling a half-million dollar home in Florida, you’ll be able to find websites that tell you a percentage that you should set aside as an estimate, but I wouldn’t recommend relying on these websites to calculate YOUR closing costs. They might be close, they might not. You’ll be able to get a loan estimate and a Closing Disclosure from your lender and a net sheet from your agent and/or closing professional that’ll be much closer to your final closing costs.

After all, nobody likes surprises and “buyer beware, beware of all costs.” I’d rather help you be prepared for your closing costs than have you become attached to a home and be shocked at your final figures.

What the seller side of the statement usually includes

Both buyers and sellers ask me often about closing or settlement expenses. I’m happy to review the items that typically appear on a seller’s settlement statement with any seller: mortgage payoffs, broker commissions (as per our Listing Agreement), repairs (or buyer’s concessions) agreed to following inspection, settlement (or Title Company) charges, prorated property taxes, prorated association dues/estoppel fee charges, applicable transfer taxes, etc.

While I can give you a general idea as to who pays for what items in a transaction, each county has it’s own customs, and we need to pay attention to what’s written in the contract as to who pays for what items. So rather than try and give you an accurate “rule of thumb” as to who pays for what, I ask my Closing agent for a net sheet (for you) early in the transaction. From there, I request an updated net sheet any time the sales price, credits, or anticipated closing date is changed.

While sellers are interested to learn about various items that will be taken out at closing, it’s in the end the net calculation (after payoffs and deductions) that interests sellers. After all, that’s the amount that will be available to help pay for their next purchase. I’m a stickler for knowing as accurately as possible what our clients will take to the closing table, reviewing each line item so we’re not caught by any surprises at the last minute and walk in confident and assured.

Seller credits: how they work and where they stop

Seller credits are an amount of money provided by the seller to the buyer towards their closing expenses at closing. Seller credits have become a useful tool in negotiations. There are buyers that can qualify for the mortgage payments, yet they may not have enough cash to cover their closing expenses. The seller may consider offering a credit to assist the buyer with some of these closing expenses.

Keep in mind that each loan program that the buyer may qualify for will have a limit as to how much the seller can contribute towards the buyer’s closing expenses. It also is very important to understand that the credit can only be towards the buyers actual closing expenses. The buyer cannot receive cash at closing from these seller provided credits. The property must also appraise for the contract purchase price. Even in situations where the parties may agree to a higher sales price with a corresponding higher seller credit, the appraisal value of the property still needs to support the agreed contract sales price. Violating these rules can result in the lender turning down your transaction.

When evaluating offers it’s always good practice for the seller to look at their net proceeds and for the buyer to evaluate how much money that person would need to bring to the table at closing. This will assist each party in comparing offers and counter offers. Make sure that any agreed credits are in writing in the contract and address what will happen in the event all of the credit isn’t used, etc. to avoid any confusion down the road.

In Florida we often have buyers looking for assistance with their closing expenses and sellers looking to sell their homes. With the proper credit in place you can make it happen for both parties.

Paying cash: what still shows up at closing

There’s a common misconception that you won’t be expected to pay any closing costs if you buy with all cash. However, while you will save on lender’s fees, a bank’s appraisal requirement and related mortgage fees and taxes, plus won’t need to provide an escrow deposit, there will still be title related fees (search and owners insurance if you elect to obtain this), settlement fees and taxes associated with the transfer (where applicable) and recording fees. If taxes haven’t yet been paid for the current year these will need to be prorated between you and the seller. If applicable there may be association fees or dues. If you’re buying a condo there will be application fees, an estoppel and move in deposits, just like everyone else.

Some things to remember. You can expedite the process by including your proof of funds with your offer. Always call your closing agent to verify wire instructions for safety purposes. I would still recommend getting an inspection and appraisal (for peace of mind). While the process often moves more swiftly when buying cash, some items can’t be expedited (that is, title work, condo association approvals, etc) Lastly, it’s always good to be aware of the costs involved at settlement so there are no surprises (just take out all of the mortgage related items).

What to check before signing

• If anything has changed during negotiations, such as repairs, credits, insurance, closing date, etc., ask for an updated Closing Disclosure estimate for buyers or an updated net sheet for sellers
• Double-check the numbers; they should be somewhat familiar to you. Compare your final numbers to your loan estimate/net sheet and make sure your cash-to-close makes sense. Go through each line and make sure each charge/proration/credit makes sense. In particular, check for any association-related items that may have been added at the last minute. If there’s something you don’t recognize, ask the closing professional to explain what it is, how it’s being calculated, who’s supposed to pay for it per our contract/customs and who’s going to receive that charge. You’re paying them to be an expert, ask them to educate you on these figures.
• Double-check your wiring instructions by calling the closing professional at a number you’re familiar with. Fraudulent wiring instructions are rampant nowadays, don’t be the next victim.

Hopefully that helps. It’s a lot of information and takes some time to digest, but in my experience, if you pay attention to the above, your final statement won’t hold any surprises.