Who Pays for Closing Costs in Oregon?

Closing costs are fees and expenses incurred by buyers and sellers during a real estate transaction. These costs are separate from the property’s purchase price and are paid at closing. Understanding these financial obligations is important for anyone buying or selling real estate in Oregon. This article clarifies which closing costs are typically paid by each party.

Buyer’s Typical Closing Costs

Buyers in Oregon typically incur closing costs, primarily associated with securing a mortgage loan. These expenses usually amount to between 2% and 5% of the home’s purchase price. For example, on a $500,000 home, buyer closing costs could range from $10,000 to $25,000.

A significant portion of these costs includes lender fees, such as the loan origination fee, which covers the lender’s administrative processing. This fee is commonly 0.5% to 1% of the total loan amount. Buyers also pay an appraisal fee, which assesses the property’s value, typically ranging from $300 to $600. Some reports indicate higher costs of $825 to $1000. A credit report fee, usually under $50, is also charged.

Title-related expenses for buyers include the lender’s title insurance policy, which protects the lender’s interest in the property. Recording fees are paid to the county to register the deed and mortgage, generally costing between $100 and $250. Buyers often prepay interest on their mortgage for the remaining days of the month in which the closing occurs.

Prepaid property taxes are prorated from the closing date through the end of the current tax period. Buyers typically pay the first year’s homeowner’s insurance premium upfront, which can range from $800 to $1,200. An initial deposit into an escrow account for future property taxes and homeowner’s insurance payments is frequently required by lenders.

Seller’s Typical Closing Costs

Sellers in Oregon also face closing costs, which often constitute a larger percentage of the sale price compared to buyers, typically ranging from 6% to 10% of the home’s value. The most substantial expense for sellers is the real estate agent commission. This commission, commonly between 5% and 6% of the home’s sale price, is typically paid by the seller and split between the buyer’s and seller’s agents.

Sellers are responsible for the owner’s title insurance policy, which protects the buyer from title defects or claims against the property. This policy’s cost is generally 0.5% to 1% of the home’s sale price. Escrow fees, which cover the services of the neutral third party managing the closing process, are often split equally between the buyer and seller.

Any outstanding mortgage balance must be paid off by the seller at closing; associated recording fees for mortgage satisfaction may apply. Property taxes are prorated, with the seller paying their portion up to the closing date. Any homeowners association (HOA) fees or special assessments must also be settled by the seller.

Negotiable Costs and Local Practices

While many closing costs are typically assigned to either the buyer or seller, some expenses are negotiable. This negotiation often occurs as part of the purchase agreement. For instance, the division of escrow fees, though commonly split 50/50, can be adjusted through negotiation.

Home warranty plans, which cover repairs or replacements of major home systems and appliances, can be paid for by either party or negotiated. Sellers may also provide credits for repairs identified during the home inspection. These seller concessions can help facilitate the sale by reducing the buyer’s out-of-pocket expenses.

Oregon’s real estate practices include a local tax. Washington County is the only county in the state that levies a transfer tax on property sales, typically split between the buyer and seller. This tax amounts to $1 per $1,000 of the sale price exceeding $13,999.

Factors Influencing Cost Allocation

Several external factors can influence the distribution of closing costs between buyers and sellers. Prevailing real estate market conditions play a role. In a buyer’s market, where more homes are for sale than interested buyers, sellers may cover a larger share of buyer closing costs to make their property more attractive. Conversely, in a seller’s market, buyers might have less leverage to negotiate for seller contributions.

The type of loan a buyer obtains can also affect cost allocation. Government-backed loans, such as FHA or VA loans, have specific rules regarding seller contributions. For example, FHA loans allow seller concessions of up to 6% of the purchase price, while VA loans typically permit up to 4%. Conventional loans also have limits on seller contributions, usually between 3% and 9% depending on the buyer’s down payment percentage.

Seller concessions are direct agreements where a seller pays a portion of the buyer’s closing costs. This can be a strategic move to facilitate the sale, especially if the buyer has limited funds. These concessions might include covering loan origination fees, appraisal fees, or buying down the interest rate.