Author Topic: Estimating closing costs?  (Read 4201 times)

Longwaytogo

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Estimating closing costs?
« on: January 16, 2014, 02:01:48 PM »
Hello I am trying to do some budgets for fix and flips and wondering what people estimate for closing costs or what their experiences have been. I understand the "70% of ARV rule" sort of allows for this but just trying to get some actual numbers/ideas. Neither my real estate agent or mortgage broker seem to have a good average because they say it varies so wildly.

Say for example I buy a fixer upper for 25K, what is the buyers portion of closing cost normally like? Then say I sell it for 100K other then 6% Realtor commission what would my other closing cost look like (looking at comps seems like sellers are paying all closing costs as incentive)?

Thanks!

Beaker

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Re: Estimating closing costs?
« Reply #1 on: January 16, 2014, 02:35:05 PM »
Neither my real estate agent or mortgage broker seem to have a good average because they say it varies so wildly.

I've found that sometimes they don't want to give you an average, but if you give them an example they can tell you the exact numbers. In fact they legally have to give a Good Faith Estimate with numbers before you get the mortgage. So maybe send your mortgage broker that example and see if she'll run numbers for that.

I happen to have just quoted numbers for a $242,500 purchase, 25% down, 5% interest. Closing costs are estimated at $3041.50, including all the appraisals, escrows, and an ILC (mini-survey). But I wouldn't be surprised if that varies from your particular area.

Longwaytogo

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Re: Estimating closing costs?
« Reply #2 on: January 16, 2014, 07:02:24 PM »
Thanks, yeah I gave them a similar scenario but they still did not seem that helpful. The purchase would end up being a cash deal so if we end up getting one of these under 30k ones I would not even be using my mortgage broker. My realtor said 5-10k. Which was a wide range so I just don't really know what to figure. I'll push him a little more and maybe he can give me a few examples of ones he's settled around 100k recently. ( I am hoping seller will pay or at least split them when I purchase so the ones at the resale are most important I guess)

arebelspy

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Re: Estimating closing costs?
« Reply #3 on: January 16, 2014, 09:44:24 PM »
I typically budget 8% for selling costs (closing costs and Realtor fees), though I'm on the lower end of the range generally. 8-10% is probably a reasonable range.

So selling for 100k, you'd probably walk with 92kish.  (Minus soft costs, naturally, rehab costs, finance costs, etc. etc. of course.)
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Longwaytogo

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Re: Estimating closing costs?
« Reply #4 on: January 17, 2014, 06:07:45 AM »
Ok Thanks! So if I'm looking at a 25K purchase, 35K rehab, 5K soft cost then a 100K sale should meet the "70 percent" rule. I'm hoping more in the 110-120 ARV to be more like 50-60% but want to use 100K to be conservative and try for a quicker sale/take offer if I need to.

arebelspy

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Re: Estimating closing costs?
« Reply #5 on: January 17, 2014, 06:12:46 AM »
That sounds quite doable, long as you do to run into issues.  Which you will, it being your first flip (take 10% off ARV, add 10% to rehab estimate), but it'll be great experience AND you could get lucky and have everything go right or the market rise during the rehab or whatever and make 10-30k more than projected.  Don't count on it, but it does happen.  :D
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Longwaytogo

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Re: Estimating closing costs?
« Reply #6 on: January 17, 2014, 11:40:50 AM »
That sounds quite doable, long as you do to run into issues.  Which you will, it being your first flip (take 10% off ARV, add 10% to rehab estimate), but it'll be great experience AND you could get lucky and have everything go right or the market rise during the rehab or whatever and make 10-30k more than projected.  Don't count on it, but it does happen.  :D

I like the sound of 10-30K extra profit, ha ha. But my real hope is to get the price down to 20K which would give me more like 40K to rehab (extra 10%) as you say. One similar to this that was flipped last summer sold for 95K after only 11 days on the market so hopefully I can get the 100K but even at 90K I could make some money and get my first flip under my belt.

Fishingmn

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Re: Estimating closing costs?
« Reply #7 on: January 20, 2014, 01:26:58 PM »
It might depend on where you live too.

In Minnesota the buyers pay most of the closing costs (unless they negotiate differently).

The average buyer who is using FHA (3.5% down) or Conventional (5-10% down) will probably have about 3 - 3.5% of the sale price in closing costs.  This covers loan origination, title work, appraisal, fees, taxes and setting up initial escrows.

The average seller will probably only have about 1% of the sale price in closing costs in the form of state deed tax, title fee and a few other minor charges.  Obviously, their commission would be on top of that but you can certainly find less than 6% too (I charge 5.5% and provide full service - so they are out there).

I'm sure a local real estate person can give you specifics for your market.

Longwaytogo

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Re: Estimating closing costs?
« Reply #8 on: January 22, 2014, 03:34:26 PM »
It might depend on where you live too.

In Minnesota the buyers pay most of the closing costs (unless they negotiate differently).

The average buyer who is using FHA (3.5% down) or Conventional (5-10% down) will probably have about 3 - 3.5% of the sale price in closing costs.  This covers loan origination, title work, appraisal, fees, taxes and setting up initial escrows.

The average seller will probably only have about 1% of the sale price in closing costs in the form of state deed tax, title fee and a few other minor charges.  Obviously, their commission would be on top of that but you can certainly find less than 6% too (I charge 5.5% and provide full service - so they are out there).

I'm sure a local real estate person can give you specifics for your market.

Yeah I am in Maryland. I believe buyer typically pays closing cost here also but in the current climate/buyers market it seems like a lot of sellers are offering "closing help" which is usually meaning they are paying both sides of closing costs. Which is why I want to be prepared for the total costs just in case. Thanks for the info; I think to be conservative I'm going to figure 10% for closing/commission combined.