What Are Typical Closing Costs in Colorado?

Closing costs represent various fees and expenses that buyers and sellers incur beyond the property’s purchase price during a real estate transaction. They are paid at the time of closing, which is when the property title is officially transferred to the new owner.

Buyer Closing Costs in Colorado

Buyers in Colorado typically encounter closing costs ranging from 2% to 5% of the home’s purchase price. For those securing a mortgage, these costs tend to be on the higher end due to various loan-related fees.

Loan origination fees cover the lender’s administrative expenses for processing the mortgage application. Appraisal fees determine the property’s market value. In Colorado, a single-family home appraisal typically costs between $800 and $950.

Buyers are also responsible for the cost of a credit report. Lender’s title insurance protects against title defects and typically costs between 0.5% and 1.0% of the home’s sale price in Colorado. Recording fees are paid to the county to register ownership transfer and mortgage documents.

A statewide “documentary fee” is set at $0.02 per $100 of the property’s sale price. Some localities may impose additional transfer fees. Attorney fees may be incurred for legal counsel during the closing process.

Seller Closing Costs in Colorado

Sellers in Colorado also bear a share of closing costs, which can range from approximately 1% to 6% of the sale price, excluding real estate commissions. When commissions are included, the total can be significantly higher, often between 8% to 10% of the home’s value. These expenses are typically deducted from the home sale proceeds at closing.

Real estate commissions usually represent the largest expense for sellers. In Colorado, the average real estate commission is about 5.74% of the home’s sale price. While sellers traditionally paid both commissions, recent changes may lead to buyers paying their own agent’s fees in some instances, though sellers may still offer to cover them to facilitate a sale.

Owner’s title insurance is another common seller expense in Colorado, protecting the buyer from issues with the property title that originated before the sale. This policy typically costs around 0.19% of the home’s sale price. Title service fees, covering the costs of title searches and the transfer of ownership, are also common for sellers. Recording fees for documents like the deed are generally a minor cost. Sellers may also incur attorney fees.

Prorations and Prepaids

Prorations are a method of fairly dividing ongoing property expenses between the buyer and seller based on the closing date. This process ensures that each party pays for the expenses only for the period they owned the property. Common items subject to proration include property taxes, homeowner’s association (HOA) dues, and sometimes utility bills.

Property taxes are frequently prorated because they are often paid in arrears, meaning the bill for a period is issued after that period has passed. In Colorado, property taxes are typically due in two installments, usually in February and June, with the tax year running from January 1 to December 31. If the seller has already paid taxes for a period extending beyond the closing date, the buyer will reimburse the seller for their portion. Conversely, if taxes are due after closing, the seller will credit the buyer for the portion of taxes owed for the seller’s period of ownership.

Prepaids refer to expenses that buyers often pay upfront at closing, which are then held in an escrow account. These typically include initial deposits for property taxes and homeowner’s insurance premiums. Lenders often require buyers to establish an escrow account to ensure these recurring costs are paid on time. The amount required for prepaids can include several months’ worth of property taxes and a full year of homeowner’s insurance premiums, depending on the lender’s requirements.

Understanding Your Closing Disclosure

The Loan Estimate and Closing Disclosure are documents that provide transparency regarding the financial aspects of a real estate transaction. For buyers, the Loan Estimate is provided by the lender within three business days of a loan application, outlining estimated closing costs and loan terms. The Closing Disclosure (CD) is the final, itemized statement of all fees and costs, and it must be provided to the buyer at least three business days before closing.

This mandatory three-day review period allows buyers to compare the final terms on the CD with the initial Loan Estimate, ensuring accuracy. The CD details the loan amount, interest rate, projected monthly payments, and a comprehensive breakdown of all closing costs.

Sellers do not receive a Loan Estimate, but they are provided with a seller’s Closing Disclosure or a similar settlement statement at closing. This document summarizes their specific costs, such as real estate commissions and title fees, and details the net proceeds from the sale. Both buyers and sellers should carefully examine their respective disclosure forms to confirm all figures align with their expectations and negotiated terms.