Taxation and Regulatory Compliance

Who Pays for Closing Costs in Massachusetts?

Get a clear breakdown of real estate closing costs in Massachusetts. Understand buyer and seller financial responsibilities for a smooth transaction.

Beyond the agreed-upon purchase price, real estate transactions in Massachusetts involve various financial considerations known as closing costs. Both buyers and sellers incur these additional expenses at the culmination of the transaction. Understanding these financial obligations is important for a smooth and predictable closing experience.

Overview of Massachusetts Closing Costs

Closing costs in Massachusetts encompass fees and expenses required to finalize a real estate transfer. These charges originate from services provided by lenders, attorneys, title services, and government entities. The specific allocation and total amount of these costs can fluctuate based on the transaction, financing, and local practices.

Buyer-Specific Closing Costs

Buyers in Massachusetts incur closing costs, many associated with securing financing. Lender fees include loan origination fees (0.5% to 1.5% of the mortgage amount) and underwriting or processing fees. Buyers also pay for property appraisal ($400 to $800) and a credit report fee ($30 to $70).

Title-related expenses for buyers include mandatory lender’s title insurance, which protects the lender’s interest in the property, and a title search fee ($300 to $400) to confirm clear ownership. Buyers also pay settlement or closing fees ($400 to $1,000). Government recording fees are paid to the Registry of Deeds to officially register the transfer of ownership, with fees such as $155 for the deed and $205 for the mortgage.

Buyers are responsible for pre-paid items at closing, which establish initial reserves for ongoing property expenses. This often includes several months of property taxes and the first year’s premium for homeowner’s insurance. Initial escrow deposits for future property taxes and insurance premiums are also common. Attorney fees for the buyer’s legal representation typically fall within a range of $800 to $1,500.

Seller-Specific Closing Costs

Sellers in Massachusetts also bear various closing costs. Real estate broker commissions often represent the largest expense for sellers, typically ranging from 5% to 6% of the sale price, which is generally split between the buyer’s and seller’s agents. Another notable cost is the Massachusetts Excise Tax, also known as the Deed Stamp Tax, which is a state tax on the transfer of real property. This tax is calculated at $4.56 for every $1,000 of the sale price.

Sellers are responsible for their attorney fees, which generally range from $800 to $1,800, depending on the complexity of the transaction. Costs associated with paying off any existing mortgage on the property, including a nominal fee to wire funds to the mortgage company and recording fees for the mortgage discharge, are also borne by the seller. Property taxes are prorated at closing, meaning the seller pays their share of taxes up to the closing date.

Understanding Closing Cost Disclosures

The process of understanding closing costs is formalized through specific financial documents provided during the mortgage and closing process. The Loan Estimate (LE) is an initial document lenders provide to borrowers within three business days of receiving a mortgage application. This document offers an estimate of the loan terms, interest rate, and anticipated closing costs, allowing borrowers to compare offers from different lenders.

Later in the process, typically at least three business days before the scheduled closing, borrowers receive the Closing Disclosure (CD). The Closing Disclosure presents the final and definitive breakdown of all closing costs, clearly itemizing each fee and specifying which party is responsible for its payment. It is important for all parties to carefully review both the Loan Estimate and the Closing Disclosure, comparing the estimated figures to the final amounts. Any discrepancies or unfamiliar charges should be questioned with the lender or closing attorney to ensure complete understanding before finalizing the transaction.

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