Who Pays Closing Costs in Georgia? What You Need To Know

You’re ready to buy or sell a home in Georgia. Then you realize you haven’t factored in closing costs. Now what?

Not only are closing costs vital to the completion of the sale, but they also represent money you need to set aside during the purchase. But is the burden on you, or the other party?

If you’ve been asking yourself, “Who pays closing costs in Georgia?” then you’re in the right place.

In this article, we’re telling you everything you need to know about closing costs in the Peach State.

Sound interesting? Keep reading!

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Closing Cost Basics

Closing costs are the various fees and expenses that buyers and sellers incur to complete a real estate transaction beyond the price of the property itself. They are typically finalized at the closing of the transaction, hence the name “closing costs.”

Closing costs can vary widely but typically include a few components.

First are appraisal fees. This is the cost for a professional appraisal of the property to determine its fair market value. Lenders often require appraisals to ensure the property is worth the loan amount.

Then there are attorney fees. In Georgia, real estate transactions typically involve attorneys who handle the closing process. Their fees cover the cost of preparing and reviewing legal documents and ensuring the legality of the transaction.

There are also inspection fees. Buyers are usually advised to get the property inspected before purchase. This fee covers the cost of a professional inspector who checks for structural issues, pests, and other potential problems.

Other common closing costs include title insurance, loan origination fees, credit report fees, and, in some cases, private mortgage insurance.

Average Closing Costs in Georgia

So, how much are closing costs in Georgia?

The average closing costs for Georgia real estate, are typically between 2% to 5% of the home’s purchase price. This percentage includes both lender and third-party fees. For example, on a $250,000 home, the closing costs could range from $5,000 to $12,500.

Georgia’s closing costs are relatively in line with the broader U.S. trends. Across the United States, average closing costs (excluding taxes) usually range from 2% to 5% of the purchase price as well.

Georgia Seller’s Closing Costs

Real Estate Agent Commissions are often the largest expense for sellers. The commission is typically a percentage of the sale price and is split between the buyer’s and seller’s agents.

In Georgia, the average commission rate ranges from 5% to 6% of the sale price.

Title Transfer Taxes are required by the state and/or local government. For Georgia Title Transfer Taxes, the tax rate is $1.00 per $1,000 of the sale price, plus an additional $0.10 per $100 or fraction thereof.

While optional, many sellers opt to purchase owner’s title insurance as a protection against any future claims or legal fees that might arise from disputes over property ownership.

In Georgia, real estate transactions typically involve an attorney who handles the closing. The attorney’s fee can vary based on the complexity of the transaction.

Sellers are responsible for covering property taxes and homeowners association (HOA) dues up until the date of the sale. These are prorated based on the time the seller owned the property during the tax or dues period.

Additional fees can include costs for a home warranty (which sellers sometimes offer to make the property more attractive to buyers), and any negotiated repairs that the seller has agreed to complete following a home inspection.

To minimize these costs, sellers can employ several strategies. While real estate agent commissions are standard, they are not fixed by law and can sometimes be negotiated, especially if the seller is bringing in a buyer without an agent.

Costs can vary significantly, so getting quotes from multiple providers can help in finding more affordable options.

Offering a home warranty can sometimes be more cost-effective than undertaking extensive repairs. Aligning the sale with the property tax cycle can help reduce the amount owed in prorated taxes.

Georgia Buyer’s Closing Costs

One of the key components of buyer’s closing costs is the lender’s title insurance. This insurance protects the lender against problems with the title to the property, such as liens or ownership disputes.

It’s different from owner’s title insurance, which protects the buyer, and is generally required by the lender as part of the mortgage process.

Loan-related fees are another significant part of closing costs for buyers. These include the loan origination fee, which is charged by the lender for processing the new loan.

This fee is typically a percentage of the loan amount. Other loan-related fees might include a credit report fee, charged for the cost of pulling the buyer’s credit reports, and various underwriting and processing fees.

Prepaids are also a crucial aspect of closing costs. These include prepaid property taxes and homeowner’s insurance. Lenders often require buyers to pay the first year’s insurance premium upfront and to deposit a certain amount into an escrow account for property taxes.

This ensures that these essential bills are paid and reduces the lender’s risk.

Additionally, buyers usually need to cover the costs of inspection and appraisal fees. The inspection fee pays for a professional inspector to evaluate the condition of the property, checking for issues like structural problems, roof condition, and system functionality.

The appraisal fee covers the cost of a professional appraisal, which is necessary to determine the property’s fair market value and is required by the lender.

To manage these costs, buyers can employ several strategies.

They can shop around and compare offers from different lenders to find the best rates and fees.

Negotiating with the seller to cover some of the closing costs is another common strategy, especially in buyer’s markets where sellers are motivated to make the sale.

Buyers can also look for lender credits, where the lender agrees to cover some of the closing costs in exchange for a slightly higher interest rate on the mortgage.

Lastly, some government and nonprofit programs offer assistance with closing costs for first-time homebuyers or buyers in certain income brackets.

Negotiating Closing Costs

In a buyer’s market, where there are more homes for sale than there are buyers, sellers may be more willing to negotiate on closing costs to attract a buyer.

In such scenarios, buyers can request the seller to pay for some or all of the closing costs as part of the sale agreement. This can be particularly effective if the seller is motivated to sell quickly.

Conversely, in a seller’s market, where there are more buyers than available homes, sellers often have the upper hand in negotiations.

However, that doesn’t mean buyers cannot negotiate at all. In such markets, buyers might find success in offering a higher purchase price in exchange for the seller covering closing costs.

This can be appealing to sellers as it increases their net proceeds from the sale.

Negotiations can also focus on specific components of the closing costs. If a home inspection reveals issues, a buyer might negotiate to have the seller cover repair costs or reduce the sale price instead of fixing the issues.

Similarly, sellers might agree to pay for a home warranty or specific closing fees in exchange for a quicker closing or more favorable terms.

Special Considerations in Georgia

In Georgia, the real estate closing process has some unique characteristics. One of the most notable aspects is the role of real estate attorneys.

In Georgia, an attorney licensed in the state must conduct the closing.

This attorney is responsible for overseeing the entire process, including the preparation and review of all documents, ensuring the legality of the transaction, and the disbursement of funds.

As such, attorney fees are a significant component of closing costs in Georgia, and these fees can vary based on the complexity of the transaction and the attorney’s expertise.

Georgia has specific requirements regarding title transfer taxes, which are taxes imposed on the transfer of title from one party to another. These taxes are calculated based on the property’s sale price and must be paid at the time of closing.

Additionally, Georgia law dictates how property taxes are prorated between the buyer and seller at closing, which can impact the overall closing costs.

The impact of property location within Georgia on closing costs is another important consideration. Closing costs can vary significantly from one county to another.

You should work with knowledgeable real estate professionals, including real estate attorneys, who are familiar with the local laws and regulations.

Different Types of Sales

In cash purchases, where the buyer does not require a mortgage, the closing costs can be considerably lower. This is because many of the fees associated with obtaining a mortgage, such as loan origination fees, credit report fees, and lender’s title insurance, are not applicable.

However, cash buyers still incur some standard costs like title search fees, attorney fees, and recording fees. Wholesale deals, where a real estate wholesaler contracts a home with a seller and then finds an interested buyer, have a unique cost structure.

Wholesalers typically make their money from the assignment fee, which is paid by the buyer. In these transactions, the end buyer is the one who pays most of the closing costs, which can include title and attorney fees, and any other standard costs associated with a property transfer.

Vacant land sales often have different closing costs compared to residential property sales.

For instance, while there might still be a need for title searches and attorney fees, costs related to mortgages are typically lower or non-existent if the purchase is in cash.

However, buyers might incur additional costs for surveys and environmental assessments, especially if the land’s intended use requires specific zoning or environmental clearances.

New-construction homes present another scenario.

Buyers of new constructions often have to pay for several unique costs, such as the builder’s fee, construction loan closing costs, and potentially higher costs for inspections and appraisals due to the new and untested nature of the property.

Additionally, buyers may need to pay for the installation of utilities and other services if they are not already established. However, some builders might offer incentives or contributions towards the buyer’s closing costs as a part of the sale deal.

Closing Cost Calculators

Closing cost calculators and online estimation tools have become invaluable resources for buyers and sellers in the real estate market. These tools are designed to provide an estimate of the closing costs associated with a real estate transaction.

They typically take into account various factors such as the home’s purchase price, location, type of loan (if applicable), and other transaction-specific details.

These calculators are especially helpful in the early stages of a real estate transaction when buyers and sellers are trying to budget for all associated costs.

They offer a baseline understanding of what to expect and can help in making informed financial decisions.

However, they are not a substitute for professional advice. It’s recommended that users of these tools also consult with real estate professionals, such as agents, brokers, and attorneys, who can provide more personalized and comprehensive insights into the closing costs for a specific transaction.

Reducing Closing Costs

One of the most practical tips for both buyers and sellers is the importance of shopping around for services. This includes comparing prices and services of various lenders, attorneys, inspectors, and title companies.

A knowledgeable agent can provide valuable advice on how to negotiate closing costs as part of the sale agreement.

They can leverage their experience and understanding of the local market to negotiate terms that might include the seller paying a portion of the buyer’s closing costs, or vice versa, depending on the market dynamics.

For buyers, getting a lender credit is another option, where the lender agrees to cover some of the closing costs in exchange for a slightly higher interest rate on the mortgage.

It’s a trade-off but can be beneficial for buyers who have less cash upfront. Additionally, both buyers and sellers should carefully review the Good Faith Estimate (GFE) or Loan Estimate and the Closing Disclosure to understand and question any fees that seem unusually high or unnecessary.