Who Typically Pays Closing Costs in Michigan?

Real estate transactions in Michigan involve various expenses beyond the agreed-upon purchase price, collectively known as closing costs. These fees cover the services and processes necessary to finalize the transfer of property ownership. Both buyers and sellers typically incur specific charges that can significantly impact the total financial outlay of the transaction.

Typical Buyer Closing Costs

Buyers in Michigan generally face a range of closing costs related to securing a mortgage and legally transferring property ownership. One common expense is the loan origination fee, which lenders charge to process the mortgage application and cover administrative costs. This fee often amounts to a percentage of the loan amount. Additionally, buyers typically pay for an appraisal fee, which covers the cost of a professional assessment to determine the property’s market value for the lender’s assurance. A credit report fee is also usually incurred by the buyer to cover the cost of obtaining their credit history for loan qualification purposes.

Lender’s title insurance is another standard cost for buyers, protecting the lender against any future claims or defects in the property’s title. Recording fees are also paid to the county or local government to officially register the new deed and mortgage documents. Buyers often encounter “prepaid items” at closing, which include initial deposits into an escrow account for future property taxes and homeowner’s insurance premiums.

Buyers may also elect to pay for an attorney to review documents and provide legal guidance, incurring attorney fees. A survey fee may be necessary to officially define the property’s boundaries. While individual costs vary, buyer closing costs in Michigan typically range from 2% to 5% of the home’s purchase price.

Typical Seller Closing Costs

Sellers in Michigan are also responsible for a distinct set of closing costs, with real estate agent commissions often representing the largest portion. This commission typically covers the services of both the listing agent and the buyer’s agent, and can range from 5% to 6% of the home’s sale price. Another significant expense is the owner’s title insurance policy, which protects the buyer from potential title issues that may arise after the sale.

Michigan real estate transfer taxes are a mandatory cost for sellers. These taxes are levied at both the state and county levels on property transfers. The statewide rate is $3.75 for every $500 of the property’s value, while an additional county transfer tax of $0.55 per $500 is also applied. Sellers are also responsible for prorated property taxes, covering the portion of the current tax period during which they owned the home.

Sellers may incur attorney fees if they choose to retain legal counsel. Additionally, sellers are responsible for paying off any outstanding Homeowners Association (HOA) fees or utility bills. Overall, seller closing costs in Michigan, largely driven by real estate commissions, can range from 6% to 10% of the home’s purchase price.

Negotiating Closing Cost Responsibilities

While traditional allocations for closing costs exist, many of these expenses are subject to negotiation between the buyer and seller. The specific terms of the purchase agreement dictate how these costs are ultimately distributed. For instance, a buyer might request “seller concessions,” where the seller agrees to pay a portion of the buyer’s closing costs. This can be a strategic move in certain market conditions.

Such negotiations are formally documented within the purchase agreement, outlining which party will cover specific fees or if a credit will be applied. A seller might offer a credit towards the buyer’s closing costs in lieu of a price reduction. Conversely, in a competitive market, a buyer might agree to cover a larger share of costs to make their offer stand out.

Understanding and Estimating Your Closing Costs

For buyers obtaining a mortgage, the Loan Estimate (LE) document is provided by the lender shortly after applying for a loan, offering a detailed breakdown of estimated closing costs. This document allows buyers to compare offers from different lenders and understand the various fees involved. It includes itemized lists of loan-related charges, title services, and government recording fees. The LE also provides an estimate of prepaid items and any amounts placed into an escrow account.

Both buyers and sellers receive a Closing Disclosure (CD) document at least three business days before the scheduled closing date. This comprehensive document presents the final and actual figures for all transaction costs. The CD provides a side-by-side comparison of the Loan Estimate with the actual costs for buyers. For sellers, it details the sale proceeds, commissions, taxes, and any other deductions or credits.