Ridiculous closing costs on cash deal?

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spyman
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Ridiculous closing costs on cash deal?

Post by spyman » Fri Jan 09, 2015 4:50 pm

I bought a tear down property 7 years ago for cash. I did nothing with the property and now am selling for cash on an "as is" basis to someone who plans to tear it down and build. I have the title policy from the purchase and even an original survey from 7 yrs ago on the huge paper paper. Buyer's atty is estimating the following seller closing costs which seem quite high to me under the circumstances.

$1,680 on seller's portion of title expense [why so much when there's no mtg/lender to insure, we have an old policy that can be brought up to date; and sale price is 235k]
$125 commitment update fee
$400 for survey [shouldn't buyer pay for this if he really needs it; or go to the person who did it 7 yrs ago for update]
$600 for 1/2 closing fee [Seems high to me where we'll just be signing a warranty deed and dealing pro rating real estate taxes]

Thanks for any insights on whether these are reasonable closing costs.

Spyman

sls239
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Re: Ridiculous closing costs on cash deal?

Post by sls239 » Fri Jan 09, 2015 5:11 pm

What does your atty say?

ourbrooks
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Re: Ridiculous closing costs on cash deal?

Post by ourbrooks » Fri Jan 09, 2015 5:17 pm

Alas and alak, at least some of those costs are reasonable. The title insurance is for the buyer of the property to protect him/her against a defect in the title, which could result in someone else claiming ownership of the property. Even if there's no mortgage, it's very reasonable for the buyer to want that insurance. Title insurance companies research the title before they issue the insurance, but what you're paying for is not the search but the insurance is to cover the case in which they missed something, like an out of state court judgment.

In some states, the amount of the insurance is set by state law.

The seller usually pays for the survey. If you go to a surveying company and ask them to update the survey, they're going to send someone out to find out what has changed. The borders of the property won't have moved, but the house that was there could have been replaced by a completely different house. You're the one providing the survey so you may be able to get someone to update it for less than the $400 but make sure the work is done by a reputable surveying firm.

Who is charging the closing fee? Where I live, closings are usually done by the title insurance company and are covered by the title insurance premium.

Even though it's a cash deal for the property, the buyer may be getting financing for the new construction and will want pretty much the same documentation as someone who is financing the purchase of an existing house.

spyman
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Re: Ridiculous closing costs on cash deal?

Post by spyman » Fri Jan 09, 2015 5:32 pm

Thanks for the info. The buyer here is himself a builder (works on his own and periodically builds a single house, or rehabs one, and sells it). He's not getting any financing. He lives a few doors down on the same block as my property, so he has passed by this property every day for the past 7 years.

If the buyer really thinks he needs a survey updated from the last time, maybe I'll see if the same surveyor can do it, perhaps for less. I'm really surprised by the cost of the title insurance. Maybe this is the going rate but I read that usually some portion of the cost is to insure the lender who has given a mortgage so that title insurance should be less expensive if it is a cash deal. Maybe if I go back to the same title company that issued the policy 7 years ago, it will be less expensive.

As for the closing costs, the builder has an attorney and he is doing the closing and I think he is getting the title through Attorneys' Title. I don't have an attorney but plan to find one to look at the contract and warranty deed.

letsgobobby
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Re: Ridiculous closing costs on cash deal?

Post by letsgobobby » Fri Jan 09, 2015 5:50 pm

Agree to the fees but renegotiate the purchase price to $237k.

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Abe
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Re: Ridiculous closing costs on cash deal?

Post by Abe » Fri Jan 09, 2015 5:53 pm

On something like this, I would just close it myself. You can go to a title company and get title insurance. Do you have a sales contract with the buyer. If so it will spell out what you agreed to do. Everything is negotiable. The buyer may pay for half the title insurance. All you need is owners title insurance since there is no mortgage. The buyer may not even require a survey. You can show him the survey you had done 7 years ago. You can pro-rate the taxes. The title company can provide the warranty deed or you can do it yourself if you are familiar with these things. You can buy a warranty deed form an office supply store. It's not that complicated. If you don't want to do it yourself, you can have the title company or your own lawyer close it. It looks like you are paying for everything anyway. You might as well have your own lawyer. You don't even have to use the sellers lawyer. You can bypass him.
Slow and steady wins the race.

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jfn111
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Re: Ridiculous closing costs on cash deal?

Post by jfn111 » Fri Jan 09, 2015 6:00 pm

I'm looking at the HUD1 from my last cash closing. This was a $145,000 purchase from Homesearch.com where I rep. the buyer. (I'm looking at the Seller side).
Title Insurance $530
Closing fee $575
Taxes and fees MN $646
Can't help with the survey.

ourbrooks
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Re: Ridiculous closing costs on cash deal?

Post by ourbrooks » Fri Jan 09, 2015 6:20 pm

Try Googling title insurance rates for your state. Some the rate quotations I've seen specifically ask whether it's a cash deal.

Allan
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Re: Ridiculous closing costs on cash deal?

Post by Allan » Fri Jan 09, 2015 6:31 pm

I buy teardowns like this (I happen to be a builder too). As a buyer I want title insurance, and typically the seller pays for this, although there is nothing in the law that says buyer cannot pay. in fact I recently paid for my own title policy because I got seller to discount the price. I would always want a new survey, and usually the buyer pays. Other miscellaneous seller fees (excluding title policy) of $500 or so seems reasonable. The fact that it is a cash deal should have no bearing on seller's costs.

Allan

leonard
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Re: Ridiculous closing costs on cash deal?

Post by leonard » Sat Jan 10, 2015 1:46 pm

spyman wrote:I bought a tear down property 7 years ago for cash. I did nothing with the property and now am selling for cash on an "as is" basis to someone who plans to tear it down and build. I have the title policy from the purchase and even an original survey from 7 yrs ago on the huge paper paper. Buyer's atty is estimating the following seller closing costs which seem quite high to me under the circumstances.

$1,680 on seller's portion of title expense [why so much when there's no mtg/lender to insure, we have an old policy that can be brought up to date; and sale price is 235k]
$125 commitment update fee
$400 for survey [shouldn't buyer pay for this if he really needs it; or go to the person who did it 7 yrs ago for update]
$600 for 1/2 closing fee [Seems high to me where we'll just be signing a warranty deed and dealing pro rating real estate taxes]

Thanks for any insights on whether these are reasonable closing costs.

Spyman
It's a negotiation. Make a counter offer.

btw - you are already the owner with clear title (you did a title search when you bought it) so the title insurance does nothing for you. Same is true of the survey. The title insurance is insurance for the buyer. the survey is too. So, I'd say you have a strong argument for them picking up those fees.

Also, if the buyer is down the street from a "tear down" I'm going to guess that part of their motivation may be seeing a relative eye sore. If they own 2 doors down, I'd say you have more leverage - since they can't easily change their own location.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

J295
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Re: Ridiculous closing costs on cash deal?

Post by J295 » Sat Jan 10, 2015 2:47 pm

As between the buyer and seller who pays for what is technically negotiable. However, in my experience there is a strong default to follow what is customary for the area (in our case, for example, closing costs and owner's premium are split, and survey paid by buyer). Here, title premiums are regulated by the state department of insurance so there is no shopping for the best rate. A prior policy is neither helpful nor relevant for the current transaction from the title company point of view, and there is no premium savings.

I would not self close for a variety of reasons, including compliance issues (for example, who is responsible to secure the non-foreign seller affidavit if one is required, and who handles the appropriate tax forms, including the 1099-R).

Good luck.

drawpoker
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Re: Ridiculous closing costs on cash deal?

Post by drawpoker » Sat Jan 10, 2015 6:20 pm

As a general rule title companies only give a discount when they are issuing 2 insurance policies - owner's and lender's policies. Since there is no lender involved in the OP's transaction, likely no discount offered.

What I found interesting about list is no mention of recordation fees (sometimes known as tax stamps)

In my area these are now running close to $4 per thousand of purchase price, enough to become a hassling point between sellers and buyers to the degree it is now common to see they are agreeing to split them 50-50

spyman
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Re: Ridiculous closing costs on cash deal?

Post by spyman » Mon Jan 12, 2015 12:02 pm

Here is an update: I contacted the company that issued the title policy 7 years ago and they said they could issue a new title policy for this transaction at a cost of $330. The cost for updating the title commitment is $75. The total closing fee would be $800 (my half $400). In other words, there is a big savings. The buyer's attorney knows the company and is fine with this. The title company is willing to accept an affidavit from me in lieu of an updated survey but after doing more research, I think it's worth paying for a new survey to avoid any risk if the survey has a mistake. I'm hoping that by going back to the same survey company, I will same some money; once they verify that the lines have not changed since last time, they won't need to draw a new survey -- just update the certification perhaps. I did not mention the recording fees/stamps in my original post because these aren't negotiable. Thanks for all the comments!

Spyman

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Meg77
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Re: Ridiculous closing costs on cash deal?

Post by Meg77 » Mon Jan 12, 2015 4:38 pm

Glad you got some of the price down. I was going to suggest getting a bid from the previous title company. Prices are usually set by state law, but the type of title ins needed can vary based on which title attorney you ask especially in a cash deal. But in general those fees don't look above average to me at all. Real estate transaction costs really stink as a rule. :x
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Luke Duke
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Re: Ridiculous closing costs on cash deal?

Post by Luke Duke » Mon Jan 12, 2015 5:05 pm

spyman wrote:Maybe if I go back to the same title company that issued the policy 7 years ago, it will be less expensive.
In Texas, the cost of title insurance is set by the state according to the dales price.
http://www.tdi.texas.gov/title/titlerates2014.html

I would definitely go back to the same title company and ask about a discount.

tim1999
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Re: Ridiculous closing costs on cash deal?

Post by tim1999 » Mon Jan 12, 2015 5:41 pm

If you lived in PA like me I'd say they were trying to screw you. Here, those are costs that are almost always paid by the buyer. The only thing split between buyer and seller is transfer tax. Varies by state though.

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