Who Pays Closing Costs in Wisconsin?

Buying or selling a home involves financial aspects beyond the purchase price. These additional expenses, known as closing costs, are fees and charges necessary to finalize a real estate transaction. Understanding these costs helps both buyers and sellers budget for their real estate endeavors.

Overview of Closing Costs

Closing costs are fees and expenses incurred during the real estate transaction process. They cover services provided by professionals and entities involved in transferring property ownership. General categories include fees related to lending, title services, government charges, and real estate services.

The specific amounts and types of closing costs differ based on factors like transaction complexity, chosen lender, and property location. These fees are compiled and paid at closing, the final stage where ownership formally transfers. Both buyers and sellers typically incur a portion of these costs.

Buyer-Paid Closing Costs in Wisconsin

Buyers in Wisconsin typically face closing costs ranging from 2% to 5% of the home’s purchase price. These expenses cover services and requirements associated with securing a mortgage and transferring property ownership.

Loan origination fees and discount points are common buyer expenses. Loan origination fees are charged by the lender for processing the mortgage application, while discount points are prepaid interest that can reduce the loan’s interest rate. Appraisal fees, which ensure the home’s value aligns with the loan amount, are typically paid by the buyer and average around $575 in Wisconsin. Credit report fees are also incurred to assess the buyer’s financial history.

Lender’s title insurance protects the mortgage lender if issues with the property’s title arise, and buyers commonly pay for this policy. Recording fees are necessary to officially document the deed and mortgage with the county, and these typically fall to the buyer. Prepaid expenses include initial payments for property taxes, homeowner’s insurance premiums, and homeowner association (HOA) dues, often held in an escrow account by the lender. Home inspection fees, averaging between $325 and $375 in Wisconsin, are generally paid by the buyer. Buyers may also incur attorney fees if they choose to retain legal counsel for the transaction.

Seller-Paid Closing Costs in Wisconsin

Sellers in Wisconsin also bear a share of closing costs, typically ranging from 6.25% to 9% of the home’s selling price. These costs largely relate to transferring ownership and facilitating the sale. The largest expense for sellers is often real estate agent commissions, which in Wisconsin average around 5.71% of the home’s sale price, split between the listing and buyer’s agents.

The owner’s title insurance policy, which protects the seller from future claims against the title, is commonly paid by the seller in Wisconsin. Wisconsin also levies a real estate transfer fee (RETF) on the seller, calculated at a rate of $3.00 per $1,000 of the property’s value. Recording fees for satisfying any existing mortgages on the property are another seller responsibility.

Property taxes are prorated at closing, meaning the seller pays their share up to the closing date. Any outstanding liens or judgments against the property must be settled by the seller before ownership transfer. Sellers may also offer a home warranty to the buyer as part of negotiation, adding to their costs. If the seller retains an attorney, their legal fees will also be part of the seller’s closing costs.

Negotiating Closing Cost Responsibilities

While typical allocations of closing costs exist, many expenses are open to negotiation between the buyer and seller. Market conditions often influence each party’s leverage in these negotiations. In a buyer’s market, where more homes are for sale than interested buyers, buyers may have more success requesting seller concessions.

Seller concessions involve the seller agreeing to pay a portion of the buyer’s closing costs. This can make the home more affordable for the buyer and help secure a deal, especially if the buyer has limited funds for upfront expenses. Buyers might also ask the seller to cover specific repair costs identified during inspections or provide credits for certain issues. Conversely, in a seller’s market, sellers may be less inclined to offer concessions due to high demand.

All agreements regarding closing cost responsibilities must be clearly documented in the offer to purchase or sales contract. Ensuring these terms are in writing is important for both parties to avoid disputes. Professional real estate agents can assist in navigating these negotiations and incorporating agreed-upon terms into the formal purchase agreement.

Finalizing Closing Costs

The process of finalizing closing costs culminates with the Closing Disclosure (CD), a crucial document provided by the lender. This form details the final terms of the mortgage loan and all associated closing costs for the buyer. Lenders are legally required to provide the Closing Disclosure to the borrower at least three business days before the scheduled closing date. This three-day period allows the buyer to review the document carefully and compare it to the initial Loan Estimate, ensuring accuracy and understanding before committing to the loan.

At closing, funds for the various closing costs are transferred. Buyers typically bring the required amount, including their down payment and closing costs, via wire transfer or cashier’s check. The closing agent, often a representative from a title company or an attorney, plays a central role in facilitating the payment and disbursement of all funds. This agent ensures all parties receive their due payments and that the transaction is completed according to the contract terms.