How Much Are Closing Costs in North Carolina?

Closing costs are fees paid at the conclusion of a real estate transaction. These expenses cover various services and charges necessary for transferring property ownership. Understanding these costs is important for budgeting when buying or selling a home, particularly in North Carolina, where specific regulations and customs apply. Preparing for these financial commitments helps ensure a smoother transaction for both buyers and sellers.

Understanding Closing Costs

Closing costs represent a collection of fees levied by various parties involved in a real estate transaction. These fees cover services provided by lenders, title companies, government entities, and attorneys. They broadly fall into categories such as lender-related charges, title and escrow fees, government taxes, and prepaid expenses. The purpose of these fees is to cover the administrative and legal processes associated with loan processing, ensuring a clear property title, and formally transferring ownership. These costs are separate from the principal loan amount or the property’s purchase price and are typically paid as a lump sum on the closing day.

Buyer’s Closing Costs in North Carolina

Buyers in North Carolina incur various closing costs, which can range from 2% to 5% of the home’s purchase price. Many expenses relate to securing a mortgage.

Lender-Related Charges

Lender fees include a loan origination fee, covering loan processing and underwriting. In North Carolina, this fee is capped at 0.25% for loans of $100,000 or more. Additional lender-related charges include an appraisal fee, typically ranging from $300 to $700, assessing the property’s market value. A credit report fee, usually under $50, is for reviewing the buyer’s credit history. Some lenders may also charge underwriting or processing fees.

Title and Escrow Fees

Title and escrow fees are also part of the buyer’s financial obligations. A title search fee, typically ranging from $60 to $600, ensuring no outstanding claims or liens against the property. Lender’s title insurance, required by lenders, protects against future title defects, costing between 0.22% and 0.25% of the sale price. Owner’s title insurance, while optional, offers protection to the buyer’s equity in the property.

Other Closing Day Costs

Buyers also typically pay a closing or settlement fee, covering administrative closing costs. Prepaid items and escrow account funding are common. This includes initial property tax payments and homeowner’s insurance premiums, the first year’s premium often paid at closing. Funds establish an escrow account for future property taxes and insurance payments. If the property is part of a homeowners association (HOA), prorated dues and sometimes an initial assessment may be required.

Government and Legal Fees

Government recording fees are incurred to officially record the deed and mortgage with the local county. These fees can vary by county, with general ranges from $26 to $540. North Carolina is an attorney-closing state; an attorney must oversee the real estate transaction. Attorneys prepare documents, examine titles, and oversee closing, with fees averaging around $248 per hour or a flat fee between $750 and $1,250 for straightforward closings. Buyers typically bear the attorney fees at closing.

Pre-Closing Inspections and Surveys

Inspection fees for home, radon, or pest inspections are paid directly to the inspector outside of closing. These inspections typically cost between $300 and $500. A survey fee may be required to confirm property boundaries.

Seller’s Closing Costs in North Carolina

Sellers in North Carolina typically bear a larger portion of closing costs, often ranging from 6% to 10% of the home’s sale price.

Real Estate Commissions

The most significant expense for sellers is usually real estate agent commissions. These commissions cover both the buyer’s and seller’s agents, averaging around 5.46% of the sale price. This amount is generally deducted from the sale proceeds at closing.

North Carolina Excise Tax

Another cost for sellers is the North Carolina Excise Tax, also known as revenue stamps or transfer tax. This state transfer tax is levied on the seller at a rate of $1 for every $500 of the property’s value. This tax must be paid to the register of deeds in the county where the property is located before the instrument of conveyance is recorded.

Other Seller Expenses

Sellers also incur attorney fees for services such as preparing the deed and handling loan payoffs. Prorated property taxes and homeowners association (HOA) dues are common, with sellers responsible for their share up to the closing date. Title-related fees may be allocated to the seller based on negotiation or local practice. Any outstanding mortgage balance on the property, including any applicable prepayment penalties, must be paid off at closing. Seller concessions or credits, negotiated contributions towards the buyer’s closing costs or repair costs, will also reduce the seller’s net proceeds.

Factors Influencing Closing Costs

Several elements can cause closing costs to fluctuate for both buyers and sellers. The property’s purchase price or the loan amount directly impacts many fees. Larger sale prices lead to higher real estate agent commissions, increased excise tax, and greater loan-related fees. For example, loan origination fees are often calculated as a percentage of the loan amount.

The type of loan secured also influences costs. Different loan programs, such as Conventional, FHA, VA, or USDA loans, carry varying fees, mortgage insurance requirements, or funding fees. VA loans, for instance, may reduce certain closing costs for eligible borrowers. Lender-specific fees also contribute to variation, as different lenders may charge different rates for origination, underwriting, or administrative services.

Location within North Carolina can vary costs. While many fees are statewide, some local recording fees or specific tax nuances might vary by county. Negotiations between the buyer and seller can significantly alter who pays for certain expenses, such as owner’s title insurance or survey fees. The buyer’s credit score can affect the interest rate on a loan and some lender fees. The property type also plays a role; for example, condominiums might have additional HOA-related fees compared to single-family homes.

Estimating and Managing Closing Costs

For buyers, estimating closing costs involves reviewing specific documents provided by their lender.

For Buyers

The Loan Estimate (LE) is a three-page form provided within three business days of a loan application, detailing the estimated costs associated with the loan. The Closing Disclosure (CD) is a five-page form provided at least three business days before closing, presenting the final, confirmed loan terms and costs. Buyers should carefully compare the LE and CD to ensure accuracy and understand any changes.

For Sellers

Sellers can obtain an estimate of their proceeds and costs through a “seller net sheet,” typically provided by their real estate agent. This document itemizes all anticipated expenses against the potential sale price, offering a clear financial snapshot. It helps sellers understand how much they stand to receive after all deductions.

Strategies to Manage Costs

Several strategies can help manage or reduce closing costs. Shopping around for service providers, such as comparing fees from multiple lenders or title companies where permitted, can lead to savings. Buyers can negotiate with sellers to cover a portion of their closing costs, especially in a buyer’s market. Sellers may also negotiate commission adjustments with their real estate agents.

Understanding different loan types offers advantages; some government-backed loans may have lower upfront fees or allow certain costs to be rolled into the loan. Reviewing the Loan Estimate and Closing Disclosure for any unexpected or inaccurate fees is important. Various assistance programs, such as the NC Home Advantage Mortgage program or the Homeownership Assistance Program in certain counties, may also help eligible buyers with down payment and closing cost assistance.