Closing costs is an umbrella term used for a realtor commissions, taxes, title related fees, filing fees, and other costs due at closing. A closing occurs at the point in a real estate transaction when the title of the property is transferred from the seller to the buyer. If you’re buying or selling a home in Illinois, you’ll want an attorney present at your real estate closing. But the best real estate attorneys – like the ones on staff at M&A Law Firm – will know how to help you save money and time when you’re closing on a home.
Closing Costs in Illinois
Closing costs are fees associated with purchasing a real estate. They are incurred by either the seller or buyer, per agreement. Costs vary depending on the location of the property, the type of property bought, and the type of loan that may be involved. Taxes are another cost to consider during closing. Homebuyers in Illinois can expect to pay an average of $1,287 in combined taxes for closing on a real estate purchase.
Illinois has one of the highest closing costs in the nation after taxes are factored in. In Illinois, the average closing costs are $5,807 after taxes. That comes to between 1.94% and 2.9% of the final home sale price. The average home in Illinois sells for $200,000 to $300,000, which puts closing costs between $3,871.33 and $8,710.50.
Illinois is an attorney-review state, meaning that both parties to a real estate sale will have lawyers look over the purchase agreement before it is finalized at the closing.
Typical Closing Documents
The seller’s attorney is responsible for preparing several documents that must be finalized at closing:
The deed – This is filed with the Recorded of Deeds office. It transfers title from the buyer to the seller.
The Affidavit of Title – A statement by the seller about any known legal issues with the property or encumbrances on the seller’s title.
Bill of Sale – A receipt-like document that shows the seller received all payments for the sale of the property.
ALTA Statement – Sworn statement of the seller disclosing any known problems with their title to the property.
Transfer Tax Forms – Tax forms that show the amount of consideration paid for by buyer for the purposes of evaluating the transfer tax costs.
Settlement Statement – An itemized list of all the money and credits during the exchange.
Other Potential Fees Included in Closing Costs
In addition to the execution of standard documents, buyers and sellers may be responsible for a suite of potential fees associated with closing on a property. Each of these services will come with a cost that varies depending on the property, the purchase process, and purchase agreement.
Application Fees – There are fees associated with process applications for loans. This fee is sometimes negotiable, but this depends on the lender. Ask what the application fee is ahead of time and see if the lender is willing to waive it all together. Application fees include credit checks for credit scores and appraisals.
Appraisal – An appraisal company will need to confirm the market value of the property. They will require a fee for their services.
Attorney Fees – An attorney will review the closing documents, usually on behalf of the buyer or lender. Illinois does not require buyers to use a lawyer to prepare the purchase agreement, however, it is required that an attorney reviews the finalize purchase agreement before it is signed.
Closing Fee or Escrow Fee – A title company, escrow company, or attorney will facilitate a closing.
Mailing Fee – The cost of sending documents to complete the different transactions.
Credit Report – Lenders will pull credit reports, which include history and score. Credit scores will heavily impact the interest rate of a loan.
Escrow Deposit for Taxes and Insurance – This is usually two months of property tax and mortgage insurance payments made at the time of the closing.
FHA Up-Front Mortgage Insurance Premium (UPMIP) – The UPMIP is paid along with the FHA loan. This is about 1.75% of the base loan amount.
Flood Determination – A third party evaluates the property to determine if it is located in a flood zone. If it is, additional flood insurance will need to be purchased separately.
Home Inspection – Home inspections verify the condition of the property and list off repairs that may need to be made before the closing. The charge will depend on the age, square footage, and other characteristics of the property.
Required Disclosures – The seller must execute and provide certain disclosures to a buyer Illinois requires lead-based paint inspection testing, disclosure of radon hazards, hazardous mold, and residential properties require a Residential Real Property Disclosure Report listing the defects to major structure elements of the home.
Homeowner’s Insurance – This cost covers the potential damages to the property. The first year of homeowner’s insurance is usually paid at the closing.
Lender’s Policy Title Insurance – This insurance verifies to the lender that the property is owned by the seller and that the lender’s mortgage is a valid lien. If there ends up being a problem with the title, the lender will be protected.
Owner’s Policy Title Insurance – This insurance protects against third parties from challenging the ownership of the property.
Prepaid Interest – The lender will likely require a payment of interest between the closing and the date of the first mortgage due.
Private Mortgage Insurance (PMI) – If the down payment is less than 20% of the property purchase price, PMIs are typically required. The first payment may be due at the closing.
Property Tax – The property tax that is due within 60 days of the purchase will be requested by the lender at the time of the closing. In some places, like Cook County, property taxes are paid in arrears. This means that means property taxes are paid for the previous year in the current year. When a property is sold, the seller must give a property tax credit to the buyer for taxes not yet due.
Recording Fees – The county or municipal recording office will have a fee for recording the deed to the property in the public lands record.
Title Company Title Search – The title company looks at the deed’s history to ensure that no one else has claim to the property.
All of these closing costs and fees may become due at the closing of your next home sale or purchase, so don’t get caught unprepared! Contact the skilled real estate attorneys at M&A Law Firm today for a free consultation.