How Much Are Closing Costs in Tennessee?

Understanding Closing Costs

Closing costs represent the various fees and expenses incurred at the culmination of a real estate transaction. These costs are necessary to complete the transfer of ownership. They cover services such as property appraisals, legal fees, title insurance, and loan origination.

Both buyers and sellers typically incur these expenses, although the specific allocation of costs can vary. This division often depends on local customs, negotiated terms within the purchase agreement, and the specific type of transaction.

Some closing costs are associated with the mortgage lending process, while others relate directly to the transfer of the property title and associated administrative tasks. These fees are collected at the time of closing, ensuring all parties involved are compensated for their roles.

Buyer Closing Costs in Tennessee

Buyers in Tennessee typically encounter various closing costs, many tied to securing a mortgage and establishing property ownership. These expenses often include fees charged by the lender for processing the loan application, such as loan origination and underwriting fees, which can range from 0.5% to 1% of the loan amount. Lenders also commonly charge a credit report fee.

Title-related fees are another significant component of buyer closing costs. This includes title insurance, which protects both the lender and the owner against future claims on the property’s title. Additionally, buyers may pay a closing fee, sometimes called an escrow fee, to the company facilitating the closing. While Tennessee does not mandate attorney involvement, buyers may choose to hire a real estate attorney, incurring associated legal fees.

Escrow costs often involve prepayments for ongoing property expenses. Buyers typically prepay property taxes and homeowner’s insurance premiums, which are then held in an escrow account by the lender to cover future payments. Other potential buyer costs include appraisal fees, usually $300 to $500, to determine the home’s value, and inspection fees, typically $300 to $500, if a home inspection is performed.

Seller Closing Costs in Tennessee

Sellers in Tennessee also incur specific closing costs, often deducted directly from the home’s sale proceeds. A substantial expense for sellers is the real estate agent commission, which typically ranges from 5% to 6% of the home’s sale price. This commission usually covers both the listing agent and the buyer’s agent fees.

Attorney fees may be a cost for sellers who choose to engage legal counsel to assist with contract drafting, document review, and resolving any legal issues during the transaction. Title insurance for the buyer is customarily paid by the seller in Tennessee, protecting the buyer from potential title disputes.

Prorated property taxes are another common seller cost, where the seller pays their share of property taxes for the portion of the year they owned the home. Tennessee also imposes a real estate transfer tax, calculated at $0.37 per $100 of the sale price, which sellers typically bear. Additionally, sellers are responsible for recording fees to officially register the deed and other legal documents with the county.

Calculating Your Tennessee Closing Costs

Closing costs in Tennessee are not a fixed amount and can vary significantly based on several factors unique to each real estate transaction. The purchase price of the home is a primary determinant, as many fees are calculated as a percentage of this value. The type of loan obtained by the buyer also influences costs, with different loan programs having varying fee structures.

For buyers, closing costs in Tennessee generally range between 2% and 5% of the purchase price. For sellers, typical closing costs, excluding real estate commissions, are around 1% to 3% of the home’s sale price. However, when including the real estate agent commission, seller closing costs can range from 6.25% to 9% of the sale price.

The specific lender chosen by the buyer can also affect the total costs, as different lenders have varying fees for services like loan origination and processing. Negotiated terms between the buyer and seller also play a role, as some costs traditionally paid by one party can be shifted to the other through negotiation. Buyers receive a Loan Estimate document shortly after applying for a mortgage, which provides an itemized list of estimated closing costs. Both buyers and sellers receive a Closing Disclosure at least three business days before closing, detailing all final costs and credits, allowing for verification before the transaction is finalized.