How Much Are Closing Costs in North Carolina in Today's Market

If you’re looking to buy or sell a home in Tarheel State, the big question on your mind is likely, “How much are closing costs in North Carolina?” Before we answer that question (which isn’t as straightforward as a number we can throw at you), let’s look at the current state of the North Carolina real estate market.

The Triangle area in North Carolina, which includes Raleigh, Durham, and Chapel Hill, has seen a significant shift in its housing market over the past year or so. Despite a slight decrease in mortgage rates from their peak in October 2023, experts forecast they will remain above 7% through 2024.

Consequently, sellers have become more negotiable, with over half in Raleigh giving concessions to buyers between August and October 2023. Inventory is set to increase, but home prices look like they’ll stay flat, which is unfortunate for buyers looking to snag a great deal on a nice home.

Understanding closing costs is important for both buyers and sellers in this market. Buyers should be aware of the various expenses associated with closing, such as lender fees, title insurance, and inspection costs. On the other hand, sellers must be prepared to pay commission fees, transfer taxes, and other expenses to close the sale.

Just how much will that set you back? Let’s dive deeper into the closing costs in North Carolina to ensure you’re fully prepared for your real estate transaction.

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What Are Closing Costs?

When you buy or sell a house in North Carolina, there are costs associated with it beyond just the selling price. These are called closing costs. Essentially, closing costs refer to the fees associated with the transaction- things like taxes, agent fees, and attorney fees.

Total closing costs can vary depending on several factors, including the property’s price, location, and the type of loan you’re using to finance your purchase. Generally, closing costs can range from 2% to 5% of the home’s purchase price. On a $300,000 home, that could mean anywhere from $6,000 to $15,000!

So why do they exist?

Closing costs are part of the process of transferring ownership of a property from one person to another. They help ensure everything is done legally and smoothly, complete with any necessary paperwork and payments.

Depending on where you live, some of the things that might be included in closing costs include:

Appraisal fees
Loan fees
Insurance costs
Prepaid property taxes
Title search fees
Credit check fees

It’s important to remember that closing costs are not optional; they’re a mandatory part of the home-buying process.

But it’s not all bad news. Some closing costs may be negotiable, and there are even programs that can help with closing costs for first-time homebuyers. Always discuss your options with your real estate agent and lender to ensure you get the best deal possible.

Average Closing Costs in North Carolina

So, how much are closing costs in North Carolina when all is said and done?

On average, North Carolina’s closing costs are pretty affordable compared to other states. According to CoreLogic’s ClosingCorp, the state’s closing costs average around 1.1% of the sale price. That means if your home costs $250,000, your closing costs would be around $2,750.

Now, let’s compare that to other states.

Pennsylvania, for example, has an average closing cost of 4.3%. That means if you bought a home for the same price of $250,000, your closing costs would be around $10,750. Yeesh!

Even Virginia, North Carolina’s neighbor, has an average closing cost of 1.7%. So, depending on the value of the home you’re interested in buying (or selling), investing in North Carolina homes is a great idea, at least regarding potential savings in the form of lower closing costs.

Keep in mind that both buyers and sellers have to pay some portion of these costs (which is the case in all states, not just North Carolina), and usually, sellers end up paying more because they have to pay for real estate agents’ commissions.

Now, don’t forget that some counties or cities may have additional fees that vary from area to area. Depending on who has the upper hand in the local housing market, either the buyer or the seller may try to negotiate who pays what fees.

But all in all, if you’re considering buying a home in North Carolina, you can breathe a little easier knowing that your closing costs won’t likely cost you another tens of thousands of dollars.

Closing Costs for Buyers

As mentioned, sellers usually shoulder most of the financial burden when it comes time to pay closing costs. This is because they usually pay the hefty real estate agent’s commissions and fees. However, that’s not all they’re responsible for covering when closing on a home sale.

Loan Origination Fees

Loan origination fees are the fees that lenders charge for processing and underwriting a loan. Across the US, these fees typically range from 0.5% to 1% of the total loan amount and can vary from lender to lender. The good news is that, in North Carolina, this fee is capped at 0.25%.

The fee will cover the cost of processing your loan application, checking your credit score, and verifying your income and employment history. However, some lenders may waive these fees, particularly if you have a good credit score or are a first-time homebuyer.

Appraisal and Inspection Fees

Appraisal and inspection fees are two separate fees that help the buyer ensure their new home is safe and isn’t going to fall apart after the papers are signed. A home appraisal assesses the property’s value, while an inspection thoroughly examines the property’s condition.

Lenders require both fees to ensure the property’s value and condition meet their standards. Appraisal fees can range anywhere from $300 to $500, while inspection fees can cost between $300 to $1,000 depending on the property size, with Angi estimating the national average to be $342 in 2024.

Title-Related Fees

Title-related fees are a series of fees associated with the transfer of ownership of the property to the buyer. These fees include a title search fee, title insurance, and other costs related to closing the transaction.

The title search fee ranges from $300 to $600 in North Carolina and covers the cost of researching the property’s title history to ensure that there are no liens or other ownership disputes.

Title insurance protects the buyer and lender from any issues related to the title and is a one-time fee paid at closing. Like a loan origination fee, it’s a one-time fee based on the home’s sale price. In North Carolina, the average is 0.22% to 0.25% of that sale value.

Insurance Premiums

Mortgage lenders may require you to deposit funds into an escrow account in advance for several months of future homeowner’s insurance payments. This can amount to an insurance premium payment of around $1,000, with the current national average being $1,311, according to the National Association of Insurance Commissioners.

Property Taxes

Similarly, you may be required to pre-pay a certain amount of property taxes into escrow. In North Carolina, property taxes can be anywhere from 0.59% to 1.012% of the assessed property value, depending on the locality.

Other Miscellaneous Fees

Other miscellaneous fees may include things like courier fees, recording fees, and processing fees. These fees aren’t typically significant (considering all of the other fees you’re already paying), ranging from $50 to $200, but can add up quickly if multiple expenses are incurred.

How Location Affects These Costs

Closing costs can vary depending on the location within North Carolina, but mostly due to the higher costs of homes and real estate trends. Some areas, such as Raleigh and Charlotte, might have higher closing costs than others due to higher housing demand and, therefore, higher home prices. The lender you choose can also make a difference.

Tips for Buyers to Reduce or Manage Closing Costs

The best way for buyers to reduce or manage their closing costs is by shopping around and comparing offers from different lenders. You can also negotiate with lenders to waive certain fees or offer better terms.

Other ways to save on closing costs include:

Using a real estate agent to find properties with lower associated fees
Negotiating with the seller to cover some of the fees
Paying some of the fees upfront

Remember to factor in closing costs when deciding how much home you can afford, and don’t be afraid to ask questions and negotiate to get the best deal possible.

Closing Costs for Sellers

If you plan to sell your home in North Carolina, it’s important to understand the costs you’ll need to cover at closing, too. Closing costs can add up quickly as a seller, so it’s important to budget accordingly. Here’s a brief breakdown of the closing costs for sellers in North Carolina so you know what to expect.

Real Estate Agent Commissions

Real estate agent commissions are one of the largest expenses for home sellers. In North Carolina, commissions typically range from 5% to 6% of the sale price.

For a median-priced home in North Carolina, which is currently about $350,000, you can expect to pay between $17,500 and $21,000 in commissions. It’s important to note that commission rates are negotiable, so it’s always a good idea to shop around and compare rates when looking for a real estate agent.

Home Repairs and Improvements

Before putting your home on the market, you may need to make some repairs or improvements to make it more attractive to buyers. These costs can add up quickly, but they’re necessary to make a good impression.

Some common repairs and improvements include painting, landscaping, and minor repairs. To help reduce costs, you may consider doing some of the work yourself or hiring a handyman instead of a contractor.

Transfer Taxes and Recording Fees

North Carolina also charges a transfer tax, or revenue stamps, on every real estate sale. The transfer tax rate is $1 for every $500 of the sale price. So, for a $350,000 home sale, you’ll need to pay $700 in transfer taxes.

In addition, there are recording fees charged by the county where the property is located. These fees vary by county but typically range from $25 to $50.

Additional Seller-Specific Fees

Additional fees could include outstanding liens or judgments on the property, prorated property taxes, homeowner association dues, and more. Working closely with your real estate agent and attorney is important to understand the fees and expenses you’ll need to cover before you initiate a sale.

Strategies for Sellers to Minimize Closing Costs

As with buyers’ closing costs, you can also use some strategies to help reduce your expenses.

First, shop around for the best commission rates from real estate agents. You can also negotiate closing costs with the buyer, although this will depend on the current market conditions. Finally, you may be able to deduct closing costs from your taxes, so discuss this with your accountant.

Who Pays What? Negotiating Closing Costs

Closing on a home can be complicated, especially regarding who pays for what.

The first thing you’ll want to understand about negotiating closing costs is that buyers may ask sellers to cover all or part of the closing costs, especially if they operate on a tight budget. Sellers, on the other hand, may be reluctant to cover costs that they feel should be the buyer’s responsibility.

Our top tip? It’s important to remember that negotiations are a two-way street, and both parties should be prepared to compromise.

Market conditions can also have an impact on who pays closing costs.

In a buyer’s market, where there are more homes for sale than buyers, sellers may be more willing to cover a larger portion of the closing costs to close the deal. Conversely, in a seller’s market with more buyers than available homes, buyers may need to offer more incentives, such as assuming the closing costs, to compete with other potential buyers.

And finally, legal considerations come into play, too.

For example, lenders are limited in the amount they can charge for certain closing costs, and sellers are prohibited from paying for certain costs associated with the buyer’s mortgage. Additionally, buyers should be aware that certain fees, such as those related to title searches and insurance, are often negotiable.

Ultimately, negotiating who pays for which closing costs can be complex, but with a bit of understanding and communication, both buyers and sellers can achieve a successful (and fair) deal.

Special Considerations for Different Types of Sales

As you learn more about closing costs in North Carolina, it’s important to consider different types of sales that might impact your expenses. Here are a few special considerations to keep in mind.

Closing Costs in New Home Sales

If you’re buying a brand-new home, you can expect to pay more in closing costs. This is because there are additional costs associated with new construction.

However, many builders offer incentives to help offset these costs or may agree to cover some of them as part of your sales contract. Be sure to read the fine print and, as always, negotiate when possible.

Impact on Closing Costs in Foreclosures and Short Sales

If you’re purchasing a home in foreclosure or being sold as a short sale, you may get a great deal on the purchase price, but be prepared for higher closing costs. These types of sales often come with additional fees, such as special title searches or legal fees, that can add up quickly. Do your research beforehand to know what to expect and budget accordingly.

For Sale By Owner (FSBO) Transactions and Closing Costs

In FSBO transactions, where a seller is selling their home without the help of a real estate agent, you may be able to save on some closing costs, such as agent fees. However, it’s important to note that you’ll still need to pay for things like title searches, insurance, and any legal fees associated with the transaction.

How to Calculate Your Closing Costs

So, again, how much are closing costs in North Carolina? Or, at least, how much can you expect yours to be?

You can use an online calculator to get a rough idea of how much you can expect to pay in closing costs. Many real estate websites offer these, and they typically prompt you to input things like the purchase price, down payment, and loan type. However, it’s important to remember that they are just estimates.

You’ll want to request a loan estimate from your lender for a more accurate calculation. This document outlines all the fees associated with your loan, including your estimated closing costs.

Once you have this estimate, you can compare it to your savings and budget accordingly. Underestimating these costs can leave you in a financial bind, while overestimating can potentially lead to lost savings. Additionally, understanding your closing costs can help you negotiate with your lender and potentially lower these costs.

Tips for Reducing Closing Costs

Seeing as buying or selling a home is a massive financial decision, it makes sense that you’d want to try and save as much money as possible. Fortunately, there are a few key tips to remember if you’re hoping to reduce your final costs.

First and foremost, negotiation is key (we’ve mentioned it a few times already, so you know it’s important!). Buyers can try to negotiate with the seller to see if they will cover a portion of the costs or ask their lender to waive certain fees. Sellers might be able to negotiate commission rates with their real estate agent or offer incentives to buyers to help offset their expenses.

It’s also important to choose the right professionals. Look for real estate agents, attorneys, and lenders who are transparent about their fees and can offer competitive rates.

Finally, it’s important to understand and compare lender fees. Ensure you know exactly what you’re being charged and what those fees cover. You may be able to save money by choosing a different lender or negotiating with your current lender.

Closing Process in North Carolina

Ready to start the home buying or selling process? Great! Here’s a step-by-step walkthrough of the closing process in North Carolina.

Step 1: Hire an Attorney

Attorneys are required to be involved in the closing process in North Carolina (and they must be different from the other party’s attorney). They play an integral role in ensuring everything is legal and binding. Your real estate agent will also be there to help you navigate any issues that may arise and to make sure you understand everything that’s happening.

Step 2: Negotiate and Sign the Purchase Agreement

The next step in the closing process is to negotiate and sign the purchase agreement. This document outlines the terms and conditions of the sale, including the purchase price, closing date, and any contingencies.

Step 3: Inspections and Appraisals

Once you sign the purchase agreement, you’ll need to schedule inspections and appraisals. An inspection will identify any issues or repairs needed before closing, while an appraisal will determine the property’s value.

Step 4: Settlement Statement Review

This is your final opportunity to review the settlement statement before closing. Your attorney will review this document with you to ensure all costs are accurate. You’ll then prepare for closing day, typically four to eight weeks after accepting the offer.

Step 5: Closing Day

On closing day, you’ll meet with your attorney, real estate agent, and the seller’s representatives to sign the final documents and transfer ownership of the property. After this, you’ll be the official new owner of the home. Or, if you’re the seller, you’ll officially be removed from the title.