On Real Estate & More – November 2022

Whether you’ve found the perfect home or are still in the early stages of the home buying process, it’s important for you to know that the down payment will not be your only out-of-pocket cost. Knowing what expenses to expect can help you plan accordingly.

Closing costs are fees and expenses over and above the price of the property, incurred by the buyer and the seller in the transfer of property ownership. Keep in mind these are typical but should not be considered hard fast rules, and some are not applicable if it is a cash transaction. While closing costs can be expensive, one of the largest expenses for a buyer with a mortgage is the interest rate. Over the life of the loan, a few small percentage points can result in hundreds of thousands of dollars in interest payments.

Buyer Normally Pays For:

  • One half of the escrow fee
  • Lender’s title policy premiums
  • Document preparation (if applicable)
  • Tax pro-ration (from date of possession or closing, depends on real estate contract)
  • Recording charges for all documents in buyer’s names
  • Homeowner’s insurance premium for first year
  • Home warranty (if applicable, depends on real estate contract)
  • All new loan charges (except if there are any required by lender for seller to pay)
  • Interim interest on new loan from date of funding to first payment date

On average, home buyers in Oregon pay closing costs ranging from 2% to 5% of the purchase price (if you are obtaining a loan). Some of the items above are explained in greater detail below.

Title Insurance and Owner Policy Insurance—In Oregon, the cost of title insurance is split between the buyer and seller. Buyers will pay for lender-required title insurance, which insures the lender’s interest in the property and that this interest has priority over all other claims to the property. Sellers will pay for owner policy insurance. This policy ensures the buyer against liens or defects to the property as long as the buyer owns the property.

Prepaid Costs—When the buyer gets a loan, their lender may require them to pay for some things, such as property taxes and homeowners or rental property insurance in advance. These are known as prepaid costs.

Seller Normally Pays For:

  • One half of the escrow fee (according to real estate contract)
  • Work orders (according to real estate contract)
  • Owner’s title insurance premiums
  • Real estate commission
  • Any judgments, tax liens, etc., against the seller
  • Any unpaid Homeowner Association dues
  • Home Warranty (if applicable, depends on real estate contract)
  • Any assessments (according to real estate contract)
  • Recording charges to clear all documents of record against the seller
  • Payoff of all loans in the seller’s name (or existing loan balance being assumed by buyer)
  • Interest accrued to lender being paid off, reconveyance fees, and any prepayment penalties

Some of the Seller costs detailed above are explained in greater detail below.

Title and escrow charges—Title charges refer to an assortment of fees related to the documentation and preparation involved in officially transferring home ownership by the title company, as well as the cost of title insurance. It is common for buyers and sellers to split these fees.

In addition to the costs associated with preparing the home’s title, the title company also charges a fee—usually called a settlement fee—for mediating the transaction.

Prorated property taxes—Because property taxes are often charged in arrears—meaning you pay them for the time you’ve owned the home at the end of the pay period—sellers usually credit the buyer a prorated amount to cover these costs.

If you have questions, make sure to consult with your Realtor or title company for more details about your specific closing costs.