Sellers and buyers alike seem to have quite a few questions about the closing process. It's to be expected. There are a lot of documents and additional fees you're supposed to pay. But, how do you adequately prepare? Understanding the closing process and title fees will give you a better idea of how much you can expect to pay before you get the keys to your new property. We've answered some of the most common questions to help you plan for buying real estate in Tennessee.
Tennessee closing costs are on average lower than other states. How much they will run is hard to confirm without knowing the price of the home, the loan amount, and the down payment. Some of the fees that go into the closing include the loan origination fee, the owner’s policy of title insurance, lender's title insurance, and appraisal. You can also expect to have tax, escrow, and attorney fees to pay at the time of closing. Don't forget about the commission for listing the property.
Any good contract can be negotiated between parties to put the financial responsibility on the buyer or the seller. There are some standard practices you can expect during closing. If you use a real estate lawyer, you can expect to pay those fees yourself. Any commission fee is commonly paid by the seller. Real estate commission fees in Tennessee vary based upon the level of service. You can think of it as if a percentage going to the listing broker and the remaining percentage going to the buyer broker.
The buyer will often pay the lender's title insurance premium, the cost for appraisals and the loan origination fee. The seller can pay for the owner's title insurance policy if it's an existing home. As we mentioned before, new builds will require the buyer to purchase the policy. Work with a trusted real estate lawyer and title company to get the best out of your contract.
Title insurance offers protection to property buyers in the event there is an issue with the title. It starts with a search to determine the existence of judgment liens, other liens, unpaid taxes, or other documents that would challenge ownership. Once the search has been conducted to produce a clean title, title insurance is purchased. Almost every lender is going to require the buyer to obtain a policy on behalf of the lender. But, that policy will only cover the lender. Protect your investment by purchasing your own title policy.
The cost of the property drives the premium for the title insurance. Every insurance company will have a formula used to calculate the amount of the premium. An example of a title calculation might include a .7% charge on every thousand dollars you spent on the home. A home purchased at $200,000 would have a $1,400 premium. But, that's just an example.
Standard rates apply based on market value. Your home's market value factors in two areas: the location of your property and the market condition. Nicer areas will drive up the value of your home. The market condition will take into account the economic climate and land values. Once you've agreed on the title insurance premium amount, the title insurance company is not allowed to make increases or decreases.
Title insurance can protect you against fraud, forged deeds, wills, liens, and undisclosed judgments that might crop up. In almost every instance you purchase a property with a mortgage, your lender will require you to buy a policy that protects the lender. Considering the investment, you would be doing yourself a disservice by not taking out protection for yourself.
At Rochford Law & Real Estate Title, we want to make it easier for you to prepare. That's why we created a title fee calculator. By plugging in your information, our calculator can give you an estimate on how much you can expect to pay.
In the state of Tennessee, who pays for the premium will vary based upon customary practices from county to county and your contract. In middle Tennessee, it's customary to expect the seller of an existing property to pay for the owner's insurance. When it's a new build, the buyer will normally pay for the owner's title insurance policy. The owner's title insurance should not be confused with the lender's policy. The lender needs coverage for the mortgage. The buyer is usually responsible for this payment. However, all of this can be negotiated amongst both parties.
“Closing costs” is an umbrella term for all expenses associated with the transferring of the title. That would include things like the title search and the title insurance premium for the benefit of your lender. The responsible party depends on the language contained in your contract. The buyer will frequently pay the premium for the loan policy of title insurance, but the buyer and seller can negotiate who is responsible for the other premium. Once you choose a title company, they can give you an estimate on how much you will be expected to pay.
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