Closing costs are the expenses that you pay when you sell your home in Missouri, which is why it is always wise to set a budget aside for these fees. The cost is usually split between the buyer and seller with a lot of case-to-case exceptions. Typically, closing costs include taxes, transfer fees, and other charges.
Below is an overview of what closing costs are, how much they cost in MO, who pays them when selling a house (hint: it’s not always the seller), and some pros and cons to consider when it comes to closing costs when selling a home in Missouri.
What are Closing Costs?
Closing costs are the fees and finance charges you pay when you buy or sell a house. They can include title search, taxes, mortgage preparation, appraisal fee, credit report fee, survey costs, etc. The fee rates also vary from lender to lender and through your payment method whether it is in cash or not.
If two parties are involved in the closing process of buying or selling real estate property, they both incur their own expense, which makes up the closing cost.
So basically, closing costs are additional fees, taxes, and preparation costs to help close a real estate transaction, which is not mentioned in the cost of a house. The money may be for taxes or other things you will need to pay off when selling a house. When you sell your home, the buyer will also have to pay closing costs. It’s usually divided into two, half for the buyer, half for the seller to pay, but there are exceptions to that rule.
Closing costs facts: The seller will always incur closing costs on any sale, whether residential or investment properties.
What are the Closing Costs in Missouri?
In 2021 (the most recent data available), the average closing costs for a single-family home were $6,837. However, the averages will likely rise in 2022 as home values continue to increase across the nation. Of course, these averages are very broad.Gina Freeman, The Mortgage Reports
Still, the closing costs in MO will vary depending on what you officially sell your house for. However, there is a percentage that most people use to estimate the closing cost in MO which is around 2%-5% of the total sale price. This does not include real estate agent fees that can range from 5-6%. This can be less if you try selling a house without a realtor, dropping down to 2.5-3% in commission fees.
The easiest way to determine your closing costs is by taking your purchase offer amount minus what you owe on the home and multiplying it by two and a half percent (2.5%). This of course could cost more depending on buyer and seller arrangements.
To give you a better idea of what closing costs include, below is a breakdown of all the closing costs you may expect to pay.
Mortgage closing costs:
- Appraisal fee ($300-$400)
- Home inspection ($300-$500)
- Application fee (varies)
- Assumption fee (varies)
- Attorney’s fee (hourly)
- Prepaid interest (based on loan amount)
- Origination fee (about 0.5% of the loan amount)
- Discount points (1 point costs 1% of the loan amount)
- Mortgage broker fee (0.50% to 2.75%)
- Mortgage insurance application fee (varies)
- Upfront mortgage insurance (0.55% to 2.25%)
- FHA, VA and USDA fees (1% to 3.3%)
- Property taxes (two months’ worth)
- Upfront HOA fee (varies)
- Homeowners insurance (depends on home value and location)
- Title search fee (about $200)
- Lender’s title insurance (varies)
- Owner’s title insurance (0.5% to 1% of purchase price)
One factor is your lender, and their fees might differ depending on their own policies. Still, they will surely let you know the specific information about how it will cost you before signing anything.
Where are Closing Costs Paid?
When you sell your house in Missouri, closing costs can be paid at a third-party service or directly to the real estate agent that sold your home. However, if it is done outside of an escrow company, there might be additional fees depending on where you live and how much money was given as payment for closing costs.
The one paying all these expenses must provide this information before signing any contracts with each other during negotiations. If needed, you may want to hire an attorney because they have enough experience in dealing with legal documents involving payments, especially those related to selling houses in MO.
Missouri Closing Cost Inclusions
Closing cost inclusions are the services that are included in the selling of a house. These include the appraisal, title search, deed preparation fees, title insurance, loan charges, and interest or escrow charges.
Closing costs are used to cover the expenses incurred during the sale of a property that is not covered by either buyer or seller. Closing costs are also known as settlement charges. It is mandatory for all financial institutions that operate in Missouri to disclose these costs to both buyer and seller before signing any final agreement.
Who Pays Closing Costs in Missouri?
In Missouri, no law dictates who must pay closing costs when purchasing a house. The buyer typically will pay all of the closing costs. However, as mentioned previously, if two parties are involved in a property transaction, both individuals have to shoulder their own expense, which makes up for the total amount of closing costs they need to pay.
The buyers, however, can negotiate with the sellers about who should be responsible for paying some or most of these expenses, especially when it comes down to splitting them evenly between each other.
However, this is not always set in stone, and sometimes even one party may end up having an unfair share much more than what was discussed in negotiations. This happens very often because many people tend to overlook this matter or don’t understand how much each item could cost.
In most cases, however, sellers will ask that a buyer assume all or at least part of this expense to save themselves from paying anything extra when selling their house, so it’s important that homebuyers know how much additional fees they should be ready to pay before buying a property. It would also help both parties involved in selling and purchasing a home in Missouri to consider asking more questions about the sales price.
When it comes to being the seller, it’s important to remember that when selling a house, you get to keep what is left after all of your expenses, such as taxes and interest paid on financing, are deducted from the final sales price. So make sure to ask more questions about how much it costs before selling, so as not to end up with less than what you thought. It doesn’t hurt either to find out how much these fees usually cost so they could give you an idea of whether or not paying them is really worth considering but mostly to make sure that everything ends perfectly.
Pros and Cons of Paying Closing Costs in Missouri
Dividing closing costs between the buyer and seller is the most commonly used method for splitting up the cost of buying and selling a home. That doesn’t go without saying there are some pros and cons of paying closing costs if the seller were to offer to cover them.
Pros of paying closing costs:
- By offering to pay all closing costs you could widen your pool of prospective buyers and potentially get an offer sooner.
- The seller doesn’t actually pay the closing costs out of pocket. The seller raises the sale price and the closing costs are rolled into the buyer’s mortgage amount instead of being paid upfront.
Cons of paying closing costs:
- Your realtor’s commission may increase. Since agents are paid commissions based on the final purchase price, a price of just $5,000 more can mean a few hundred extras in commissions. And those commissions? They come straight out of your (the seller’s) pocket.
- It’s not always possible for the seller to pay the closing costs. Mortgage lenders limit the amount of closing costs a seller can cover based on the loan program and the buyer’s loan-to-value ratio.
- You might run into a problem if your house won’t appraise for a higher sale price. A lender will not agree to a mortgage if the house’s sale price is not in line with its value in current market conditions. This is a common issue if your home is in need of repairs, is outdated or damaged.
Closing costs might be high and compound them with repair expenses, listing fees, and other selling-related expenditures; you may be losing out on several thousand dollars worth of earnings. Looking for other selling alternatives may be a better option, like accepting a cash offer for your house.
If you’re looking to avoid closing costs when selling your Missouri home, it would be wise to sell to a local “We buy homes Kansas City” company. These companies can make you an offer within 24-hours, purchase your house with cash and close in as little as two weeks! They also don’t charge the typical 6% real estate commission fee like traditional agents, which means more money in your pocket after closing day. And those high closing costs are negotiable, and in most cases, covered by the home buyer.