The Golden State of California is a dream haven for both the locals and those moving in from other parts of the country. Once you find someone who wants to buy your home, you get to start the exciting process of selling your home so you can move on to your next adventure.
The only downside to selling your home is the closing costs. Selling a home in California can become expensive very quickly, but there is no need to fret. You have options!
If you are looking for more information on the closing costs in California, you came to the right spot. We will tackle the various closing costs you are responsible for and who you can reach out to for help with minimizing these costs.
How Much Are Closing Costs in California?
Closing costs are a combination of taxes and service fees collected during the final stages of the home buying process. When someone buys a home in California, the local government agencies receive a portion of the taxes before the title transfer.
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Any vendors that provide any real estate services also receive payment during the closing phase. The buyer and the seller, at times will need to decide who pays closing costs in California.
The buyer and the seller are held responsible for certain closing costs called escrow. There are two phases of escrow, the beginning and the closing of escrow.
Beginning of Escrow
During the beginning of escrow, buyers pay an earnest money deposit as part of their closing costs in California. The buyer puts in this deposit soon after the seller accepts the offer amount. This ensures that the buyer is serious about purchasing the home.
Once this money is received, the seller will take the house off the market, making it unavailable for other potential buyers to bid on the home. This earnest money deposit, also known as a good faith deposit, is refundable so long as you follow the terms and conditions in your offer letter. The average earnest money deposit is about 1% of the home’s purchase price.
During this escrow phase, an escrow company serves as the middle man between the seller and the buyer. This neutral third-party company holds the money during these major transactions until the home sale is final.
Escrow companies are responsible for ensuring that the buyer does not receive the property until everything is complete according to the contract.
Escrow companies charge a fee for using their services, and they are typically listed as “escrow fees” on your settlement statement. Not every county requires you to pay these escrow fees.
If you do need to pay these fees, they will be listed in the offer contract received from the buyer. This escrow fee amount is negotiable if required. These fees typically cost about $2.00 for every $1,000 of the home’s sale prices plus an additional fee of $250.
Counties where buyers pay for the escrow fees are:
- San Francisco
- Contra Costa
Counties where the seller pays for these fees are:
- Santa Clara
- San Mateo
There are certain counties where the seller and the buyer split the closing costs in California. Those counties are Fresno, Orange, and Riverside.
Other Buyer Closing Costs
Homebuyers also need to take into consideration a few non-refundable fees during this escrow phase. Homebuyers are responsible for the cost of the home’s appraisal and inspection. It is always essential to ensure that the house goes through an inspection to ensure there aren’t any major repairs needed.
Title insurance is a necessary coverage that protects the buyer from any financial loss due to defects on the title. For example, if someone claims they are the homeowner after closing the sale and are verified to be the owner, the new homebuyer loses out on the sale.
Title insurance also protects the buyer from any liens that may pop up during the home sale. Also, any potentially unpaid debt that the seller may have may come up during the home sale process. Title insurance will protect the buyer from any of these situations, and the buyer will need to purchase this insurance.
Closing of Escrow
Escrow closing happens after any repairs are complete and all the other contingencies listed in the contract are met. Once these are met, the deal moves into the closing phase.
California County Transfer Tax
Part of the seller’s closing costs includes the city and county transfer taxes. These taxes are also known as documentary transfer taxes.
As mentioned earlier, when you transfer the ownership of your property to someone else, there is a tax that incurs. These fees are about $1.10 for every $1,000 of the home’s sale price, and the government receives this payment.
City Transfer Fees
Cities with transfer fees charge you about $3.30 for every $1,000 of your home’s sale price. Not every city has this fee, but if your city does, you can expect to pay them in addition to the county fee. Depending on where your home is, you will have to front this bill or split the responsibility with the buyer.
When looking at your settlement statement, you may also find other additional miscellaneous fees. Those other fees can include any HOA fees, reports, recording fees, or notary fees.
One of the most significant fees that you will have to keep in mind is the realtor commission fee. If a real estate agent is involved in the deal, you can likely expect to pay 5% in commission for the final amount of the home’s sale price.
Alternate Ways to Sell Your Home
The average closing costs in California depend on the final home’s purchase price and other miscellaneous fees. Most residents spend upwards of $20,000 or more when selling their homes in California. To save money on these high costs, you have the option to go through an iBuyer.
What Is an iBuyer?
As technology continues to advance, so does the way that people do their tasks. The traditional home buying and selling process is outdated and can take a lot of time to complete. Not only can this process be time-consuming, but it is also very costly.
An iBuyer is the solution for simplifying and streamlining the home selling process. iBuyers, also known as instant buyers, are real estate companies that buy and sell properties through cutting-edge technology.
These companies use an algorithm that calculates the best price for your home in your area. The algorithm uses up-to-date technology to read and produce real-time results, offering you the best offer on your home without the groundwork a real estate agent would have to do.
Why Use an iBuyer?
If you don’t want to deal with the excessive fees and marketing of your home, then an iBuyer will be your best bet. Once you accept an offer from their company, they will take ownership of your home and will market and resell it for you.
Real estate agents usually do the work of finding prospects, showing the house, and facilitating the homebuying process, but that can take weeks, if not months, depending on the market’s volatility. iBuyers take out that entire process, and they can generate an offer within 24 to 48 hours after receiving your application.
Selling to an iBuyer
Each company has its way of handling its process, but they are generally all somewhat similar. You first will go onto the iBuyer’s website and request an offer for your home. You will input your information about your house, and if the home meets the criteria, the company will extend you an offer.
Once you have your offer, most companies will allow you about five days to make your final decision. If you are happy with the offer, you will let the company know, and they will start the selling process almost immediately.
The iBuyer will send someone to inspect the home to verify that the house matches the information you input. If there are any significant repairs your house needs, they will cover that for you and deduct that repair amount from your final offer.
Once all the repairs are taken care of, you will then select your desired move-out date. Typically, you have between two weeks and two months to move out of the house. After you close and move out, you receive your net proceeds within a matter of a few days!
Minimize Closing Costs in California
Selling your home in California can be an exciting time, especially if you are moving on into a new home shortly after the sale. Of course, when you sell your home, you want to try to get it done as soon as possible, so you’re not stuck paying two mortgages.
If this sounds anything like you, then utilizing an iBuyer to minimize your closing costs is an excellent option. If you are looking for more information on closing costs in California or if you’re ready to request a quote, submit your address to us now. We offer free zero-obligation quotes!