Who Pays for Closing Costs in Maryland?

Real estate transactions involve financial considerations beyond the purchase price. Closing costs are fees incurred at property transfer. These costs are standard for buying or selling real estate, including in Maryland. Understanding these fees is important for both buyers and sellers to prepare for financial obligations.

Overview of Closing Costs in Maryland

Closing costs encompass a range of charges. These fees are paid to various parties, including lenders, title companies, and government entities. Common categories include loan-related fees, such as origination and underwriting, and title services, which involve title searches and title insurance. Government recording fees cover the cost of registering the deed and other documents.

Maryland-specific taxes contribute to closing costs. These include state and county transfer taxes, alongside recordation taxes. Transfer taxes are levied when property ownership changes hands, while recordation taxes apply to recording deeds and mortgages. Rates for these taxes can vary by county.

Buyer’s Typical Closing Costs in Maryland

Buyers in Maryland typically bear a substantial portion of closing costs, often ranging from 2% to 5% of the home’s purchase price. Lender-related fees are a primary buyer expense. These include a loan origination fee, typically about 1% of the total loan amount for administrative costs. Other common lender charges include credit report fees, appraisal fees for property valuation, and fees for a survey to verify property lines.

Appraisal fees in Maryland generally range from $300 to $500, though they can reach up to $1,200 for larger or more complex properties; the buyer is usually responsible. Buyers may also encounter fees for flood determination and prepaid interest, covering interest accruing between the closing date and the first mortgage payment. Establishing an escrow account for future property taxes and homeowners insurance premiums requires a deposit from the buyer, often equivalent to two months of payments.

Title insurance is another significant cost for buyers, specifically the lender’s title insurance policy, protecting the lender’s investment. While owner’s title insurance is optional, buyers often pay for both. For FHA loans, an Up-Front Mortgage Insurance Premium (UFMIP) of 1.75% of the base loan amount is required, which can be paid at closing or rolled into the mortgage. Buyers may also pay for loan discount points to reduce their interest rate, with one point typically equaling 1% of the loan amount.

Seller’s Typical Closing Costs in Maryland

Sellers in Maryland incur a range of closing costs, which can average from 6% to 10% of the home’s sale price, due to real estate agent commissions. These commissions are generally the most significant expense for sellers, typically ranging from 5.13% to 5.46% of the home’s sale price, covering both listing and buyer’s agents’ fees. While traditionally paid by the seller, recent changes in real estate practices may shift how buyer agent commissions are handled.

Owner’s title insurance is customarily paid by the seller in Maryland, protecting the homeowner from past title defects. The cost typically falls between 0.5% and 1.0% of the home’s sale price. Sellers are also responsible for government recording fees and their portion of state and county transfer and recordation taxes.

In Maryland, the state transfer tax is 0.5% of the sale price. For qualified first-time homebuyers, it is reduced to 0.25%, with the seller typically covering the buyer’s portion. Unless specified in the contract, transfer and recordation taxes are often split equally between the buyer and seller. Other seller expenses include paying off outstanding mortgage balance, prorated property taxes up to the closing date, and agreed-upon repair credits or HOA fees.

Negotiating Closing Costs in Maryland

While customary allocations exist between buyers and sellers in Maryland, most expenses are subject to negotiation. The purchase agreement formalizes who pays what. Buyers can request seller concessions, where the seller agrees to contribute towards the buyer’s closing costs. This is beneficial for buyers who wish to minimize upfront expenses beyond the down payment.

Seller contributions can include a credit applied directly to the buyer’s closing costs or covering specific fees like inspection or appraisal costs. The amount a seller can contribute is limited by the loan type and down payment percentage. For instance, conventional loans may allow seller contributions of up to 3% for down payments less than 10%, or up to 9% for down payments of 25% or more. Such negotiations are common, especially in a buyer’s market, to make a property more attractive or facilitate a quicker sale.