Closing Costs

Section: Closing Costs Estimated study time: 45 minutes Content: Closing costs are the fees and charges paid by the buyer and seller at the time of property transfer. In Massachusetts, closing costs are regulated and disclosed through TRID (for financed transactions) and through the settlement statement. Understanding which party pays which costs is heavily tested on the Massachusetts real estate exam. Seller closing costs typically include: Massachusetts recording stamps (excise tax), real estate broker commissions, attorney fees for the seller's representation, payoff of existing mortgages, prorated real estate taxes for the seller's period of ownership, and any outstanding condo fees or assessments. The Massachusetts recording stamp (excise tax) is $2.28 per $500 (or fraction thereof) of the sale price, paid by the seller (grantor). Recording stamp math is a tested calculation. The stamps are assessed at $4.56 per $1,000 of sale price (equivalently, $2.28 per $500). For a property selling for $505,100: first, round up to the nearest $500 increment ($505,500); then divide by $500 to get the number of $500 increments (1,011); then multiply by $2.28 per increment ($2,305.08). Key rule: always round UP to the nearest $500 — never down. Some municipalities (Barnstable County, for example) have an additional local excise tax. Transfer taxes and recording stamps are universally the seller's expense in Massachusetts. Buyer closing costs typically include: lender origination fees (points, application fees), appraisal fee, credit report fee, attorney fees for the buyer's representation, title search fees, title insurance premiums (lender's policy paid by buyer; owner's policy optional), recording fees for the deed and new mortgage, prepaid items (homeowners insurance premium, property tax escrow impounds, prepaid interest from closing to month-end), private mortgage insurance (PMI)…