What are typical buyer closing costs in Silicon Valley?

Typical buyer closing costs - home buyer costs to close escrowWhat are typical buyer closing costs in San Jose? How much extra money will it take, beyond the down payment, get into that new home in Silicon Valley? The cash needed at the closing table varies depending on many factors.

Today we will offer some general information on home buyer‘s closing costs in Silicon Valley. Different jurisdictions and situations may have additional closing fees.

Typical buyer closing costs – rough estimate

Just need a rule of thumb on the costs? The average closing costs percentage is between one half and two percent of the purchase price, but your actual figure could be substantially more or less, depending on many factors. Most of our buyers pay between .5% and 1%. 

 Recurring versus non-recurring closing costs

Please note that some fees will be recurring (meaning they will be things you’ll pay again, like property taxes or HOA bills) and others non-recurring (which are one-time fees like title insurance). Where you are in the calendar year can impact fees like property taxes due at closing, too.

Some of the main factors that cause the fees due at closing to rise or fall include:

  • loans and related required fees are generally a home buyer’s steepest fee after the down payment
  • home buyers who buy down the interest rate with points will see their cash needed to close escrow rise significantly
  • whether or not you pay for inspections
  • what city you’re buying in
  • what type of home, or if it’s in an HOA or not
  • and many other smaller escrow related fees, such as if you both fund the loan and close on the same day
  • any pest work or other repairs that you pay for on the home prior to the completion of the sale (this is uncommon, but I’ve seen it happen)
  • when the next property tax bill is due (you won’t pay more or less, but it’s whether that amount is due at closing or a few months later)

There are online tools that can bring clarity to the typical buyer closing costs, but again only roughly. You will find a closing costs calculator for buyer at ORTC.com, the Old Republic Title Company’s site, and then click on the link for the online netsheets. Or use this link for their online netsheets.

Next we’ll go over what these various typical buyer closing costs can run.

(more…)

What are Referral Fees in Real Estate Transactions?

dollar-billReal estate referral fees are often mysterious to folks who are buying and selling homes (whether in Silicon Valley or anywhere else), and there are a lot of misconceptions about them. So I’m going to explain what they are, who can get them,  how it works, and what to “beware of” with them.

What they are: referral fees are a broker-to-broker (agent to agent) payment of money for business that one agent refers to another. For instance, if my friend, a real estate licensee, asks me to help her friend or relative to sell a home in Los Gatos, Saratoga, or San Jose (let’s say she’s in LA), I will pay her a percentage of the sales price (or possibly a fixed dollar amount) because she referred me the business. The amount varies, just like commissions do, but 25% is pretty common. When I was at Windermere, 20% was most common. When I was at Intero, there was no set fee but some agents required 30%. Some relocation firms demand 35% or more….

Relocation companies also vary among themselves in how this works, but basically they charge the agent a fairly high fee (40 – 50% is not unheard of, sometimes more – and the agent’s company often also reduces the “split” between the agent and the company) so that the buyer or seller’s move is underwritten somewhat by the commission dollars. The agent makes a lot less than usual on this deal, but hopefully the client will be happy and refer the agent to others (who will not have a referral fee attached to them).

What about Costco, USAA or others? To work a “referral” deal, they have to be licensed by the department of real estate in the places where they are referring business. Let’s say a big company wants in on this lucrative market. They get a license and offer to “feed” potential clients to hungry agents and in turn charge a set amount, such as 30%, as a “referral fee”. The big company, in turn, tells the potential buyer or seller, “find your agent through us and we’ll get you a rebate (kickback) of XX% or XX dollars!”  So maybe the agent is charged 30% to “find” a client and the client gets 20% back. Guess who gets the rest? Yup, the big company.
(more…)