What Are Closing Costs in Washington State?

Closing costs represent a collection of fees and expenses incurred during the final stages of a real estate transaction. These charges are distinct from the property’s purchase price and are necessary to facilitate the transfer of ownership from a seller to a buyer. They encompass various services and legal requirements that must be satisfied before a sale can be finalized. These costs ensure the transaction is legally sound and that all parties meet their financial obligations.

Overview of Closing Costs

Closing costs broadly include administrative, legal, and financial fees associated with transferring property ownership. Both the buyer and the seller incur these expenses, which cover professional services and taxes required to complete the real estate transaction. The specific amounts and types of fees can vary depending on the property’s location, transaction complexity, and negotiated terms.

A fundamental distinction exists between the costs typically borne by the buyer and those paid by the seller. Buyers generally incur costs related to securing their mortgage and establishing ownership. Sellers are usually responsible for expenses associated with transferring the property and satisfying existing obligations. Understanding these respective responsibilities helps both buyers and sellers anticipate their financial commitments.

Buyer Closing Costs in Washington State

Buyers in Washington State typically encounter various closing costs, many tied to securing a mortgage loan. These include:
Lender fees: Compensate the financial institution for processing the loan, including a loan origination fee (0.5% to 1% of the loan amount) and an underwriting fee.
Appraisal fee: Usually $300 to $600, paid to a licensed appraiser to ensure the property’s value supports the loan amount.
Credit report fee: Typically $25 to $50.
Flood certification fee: May be charged.

Title insurance is another cost for buyers, specifically the lender’s policy. This policy protects the lender’s financial interest in the property against future title defects or claims. While the seller typically pays the owner’s title insurance policy, the buyer is usually responsible for the lender’s policy, which generally costs $1,000 to $2,888 depending on the loan amount.

Escrow fees are shared between the buyer and seller, covering the services of a neutral third party who manages funds and documents. The buyer’s portion can range from $500 to $2,000, depending on the property’s value. Recording fees are also incurred by the buyer to officially register the new deed and mortgage with the county. These fees are typically $100 to $300 per document.

Buyers are often required to prepay certain items at closing to establish an escrow account or cover initial expenses. This can include several months of property taxes, a portion of the annual homeowner’s insurance premium, and prepaid interest covering the period from the closing date until the first full mortgage payment is due.

Home inspection fees, typically $300 to $500, are paid to a professional inspector to assess the property’s condition. Appraisal fees are also a buyer’s closing cost.

Seller Closing Costs in Washington State

Sellers in Washington State incur a range of closing costs, with real estate commissions often the largest expense. These commissions typically cover the services of both the seller’s and buyer’s real estate agents. The standard commission rate in Washington usually falls between 5% and 6% of the home’s sale price. This amount is customarily paid by the seller from the sale proceeds.

Another substantial cost for sellers is the Real Estate Excise Tax (REET), a state tax on the sale of real property in Washington. This tax has a progressive rate structure based on the selling price. State rates range from 1.10% for sales of $525,000 or less, up to 3% for amounts over $3,025,000. Local REET rates, typically 0.25% to 0.5%, are also added depending on the county and municipality.

Title insurance also impacts sellers, as they customarily pay for the owner’s title insurance policy in Washington State. This policy protects the buyer from financial losses due to undisclosed claims or defects in the property’s title that existed before the sale. It is a one-time fee, often ranging from 0.5% to 1% of the purchase price.

Sellers share escrow fees with buyers, covering the services of a neutral third-party escrow agent. The seller’s portion of these fees can range from $500 to $2,000. Recording fees may also be incurred by the seller, particularly for the release of any old mortgage or lien on the property. These fees are generally small, often around $50 to $60.

Prorated property taxes represent another common seller expense. Sellers are responsible for property taxes accrued up to the date of closing. If property taxes have been paid for a period extending beyond the closing date, the buyer will reimburse the seller for the unused portion.

Calculating and Paying Closing Costs

Buyers receiving a mortgage loan are provided with a Loan Estimate form by their lender within three business days of applying. This three-page document details the estimated interest rate, monthly payments, and an itemized breakdown of estimated closing costs, allowing buyers to compare offers.

Prior to closing, both buyers and sellers receive a Closing Disclosure form. This five-page document provides the final details of the mortgage loan and all closing costs. It must be provided at least three business days before the scheduled closing date, allowing review and comparison against the initial Loan Estimate.

Payment of closing costs typically occurs at the closing appointment, facilitated by the escrow agent. Buyers generally bring certified funds, such as a cashier’s check, or arrange for a wire transfer. Personal checks or cash are generally not accepted. The escrow agent collects and disburses funds to various service providers.

For sellers, closing costs like real estate commissions and the Real Estate Excise Tax are usually deducted directly from the home sale proceeds. Sellers typically do not need to bring funds to closing unless proceeds are insufficient. The escrow agent manages this distribution, ensuring seller obligations are met before transferring net proceeds.