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Buying and selling a home are two of the largest and most complicated financial transactions most people ever make. Closing costs, the fees and taxes that are part of every real estate deal, can tack on as much as an additional 2 to 5 percent of the sale price.
According to Redfin data, the median sale price of a home in Colorado was $580,900 as of May 2023. While that’s quite a bit higher than the national median sale price of $396,100, closing costs here are lower than the national average. In fact, CoreLogic’s ClosingCorp reports that Colorado has an unusually low closing-cost rate of just 0.7 percent of a home’s sale price. (Compare that to 1.2 percent, 1.1 percent and and 1.0 percent in neighboring states Arizona, New Mexico and Utah, respectively.)
How much are closing costs in Colorado?
Closing costs vary widely from state to state. In Colorado, based on the median sale price of $580,900 and the rate of 0.7 percent, these costs typically add up to just over $4,000. ClosingCorps’ calculations include lender’s and owner’s title policies; appraisal, settlement and recording fees; and transfer taxes. Agent commissions and optional mortgage discounts points are not considered.
Since much is based on the home’s price, where in Colorado the home is located has a lot to do with the closing costs that will be owed. For example, in glamorous Aspen, where the median sale price of a home is more than $3.6 million per Redfin, even Colorado’s low closing-cost rate will still run you around $25,000. In Denver, however, the median price is $3 million less at $600,000; and in Pueblo, it’s a very affordable $257,950.
Who pays closing costs in Colorado, buyers or sellers?
The full amount of closing costs isn’t shouldered by only one party: Buyers and sellers both have closing costs to pay in Colorado (and in every state). Although buyers typically pay most traditional closing costs, sellers usually pay the real estate agent commissions, which are much pricier at 5 to 6 percent of the home’s sale price.
Keep in mind that either side may try to negotiate their share of closing costs. And either party may choose to hire a real estate attorney to represent them, which would tack on an additional cost. Individual counties and cities sometimes have their own closing fees as well.
Closing costs for buyers
In real estate transactions, buyers pay many costs related to mortgage financing, such as lender and property-related fees. Here are some common ones for Colorado buyers:
- Application and credit fees: Mortgage lenders often charge nominal fees for processing your loan application and checking your credit report.
- Origination fee: Many lenders also charge an origination fee for establishing your loan. These are typically a percentage of the loan amount. When you’re comparing lenders, take note of how much they charge, as it can vary widely from one institution to another.
- Appraisal fee: Lenders require an appraisal to make sure the home you want to buy is worth the amount you want to borrow. Appraisals usually cost around $300–$400.
- Mortgage points: Buyers may opt to pay money upfront to lower the interest rate on their loan. These so-called mortgage discount points can save you money over the long haul but will cost you more at closing.
- Escrow charges: Mortgage lenders may require you to deposit funds into an escrow account for future payments of homeowner’s insurance and property taxes. You may have to pay several months in advance at closing.
- Title fees: A title search involves reviewing property records to confirm that there aren’t any liens or encumbrances on the home’s title. A title search is usually part of the cost of title insurance in Colorado. A lender’s title insurance policy is a one-time premium paid at closing that protects your lender against defects with the title.
- Inspection fee: Most buyers will want a professional home inspection to determine whether the home has any major damage or problems. An inspection typically costs between $200 and $500; in Denver, they average around $340 according to HomeAdvisor.
- Transfer tax: In Colorado, the typical transfer tax is referred to as a documentary fee and costs 2 cents for every $100 dollars of the home’s sale price. On a median-priced $580,900 home, that would be about $116.
Closing costs for sellers
As a Colorado seller, your biggest expense will be real estate agent commissions, which can run up to 6 percent of the home’s sale price. On a median-priced $580,900 home, that would be close to $35,000. Sellers typically pay a few other costs as well; here are some common ones:
- Title insurance: In Colorado, it is common for the seller to pay for title insurance to protect the buyer in case of a problem with the title.
- Recording fees: There is a nominal fee to record the deed, also typically paid by the seller.
- Prorated property taxes and HOA fees: Sellers are responsible for property taxes up to the closing date. And if the home is part of a homeowners association, they will be on the hook for HOA fees through the closing date as well.
- Concessions: To close the deal, many sellers agree to what are called seller concessions, in which you pay some of the buyer’s closing costs or cover the cost of needed repairs.
Lowering your closing costs in Colorado
Most closing costs are negotiable, at least to some degree. In a seller’s market, buyers may have less power to negotiate, and the reverse is true in a buyer’s market. Sellers can also often negotiate the agents’ commission.
Buyers, and especially first-time buyers, should check to see if they qualify for federal, state, or local assistance to help pay for closing costs. Colorado offers many first-time buyer programs that can assist with the costs associated with purchasing a home. Your agent may be able to help you find programs that you’re eligible for, so don’t hesitate to ask.
Find a local real estate agent
Whether you are buying or selling in Colorado, the process will be much smoother with a knowledgeable local real estate agent at your side. An agent’s expertise can guide you through the complexity of the closing process. To find one, start by asking friends and relatives for recommendations. Don’t just take their word for it, though: Check the agents’ online presence and interview several candidates to find someone you click with.
Buyers typically pay financing-related costs, such as loan application and origination fees, appraisal and home inspection fees and lender’s title insurance. Sellers, on the other hand, pay for agent commissions, in addition to title- and deed-related fees, prorated property taxes and, often, seller concessions.
Both buyers and sellers pay their share of closing costs, in Colorado and in every state. Although buyers typically pay most of the traditional closing costs, sellers usually pay more monetarily, because they cover the cost of the real estate agents’ commissions.