Most millennials are blissfully unaware that title insurance, lender origination fees and other closing costs can amount to 3 to 5 percent of a home’s purchase price — $6,000 to $10,000 for a median-priced home — and it’s usually up to Realtors to clue them in, according to a survey by ClosingCorp.
Among 1,000 adults taking the survey, two-thirds of those in the 18- to 34-year-old age bracket were unaware of closing costs. Millennials were twice as likely to learn about closing costs from a Realtor than from a lender, the survey found.
Throw in Realtors’ commissions — which typically range from 5 to 7 percent — and the actual price of that $202,600 median-priced home could end up being north of $220,000.
The survey highlights the need to better educate all consumers on the closing process, particularly millennials and first-time homebuyers who may need to adjust their assumptions about how much house they can buy, said ClosingCorp CEO Brian Benson in a statement.
“While interest rates are often the driving force in initiating a real estate transaction, the Realtor, lender, title and other settlement fees also have a significant impact on the down payment and cash outflow from the borrower perspective,” Benson said. “Not understanding how everything is related can be a real impediment for first-time homebuyers who want to get into the market.”
An annual survey by Bankrate ranked Texas, Alaska, New York, Hawaii, Wisconsin, Nebraska, Vermont, Florida, New Hampshire and New Jersey as the states with the highest closing costs in 2014. The survey excluded “highly variable” costs like title insurance and escrow fees.
Last year ClosingCorp rolled out Seller Net Sheet, a tool designed to help real estate agents give sellers an idea of how much they can expect to take home at closing.
ClosingCorp also offers a good faith estimate service, SmartGFE, that’s used by mortgage lenders to accurately estimate fees for settlement services like title insurance and stay within tolerances mandated by the Real Estate Settlement Procedures Act (RESPA).
Mid-Atlantic multiple listing service Metropolitan Regional Information Systems Inc. has partnered with settlement services firm Federal Title & Escrow Co. to arm MRIS’ 44,000 members with an app that calculates buyer and seller closing costs. The app, MRIS Close It!, generates nonbinding HUD-1 settlement statements and net sales sheets.