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Whether you’re thinking about buying a house in Florida or selling the one you currently own, there will be one cloud in the Sunshine State as you work toward a deal: closing costs. What are closing costs? They are the many extra fees that aren’t accounted for in the listing price of a property.
While Florida is known for a relatively low cost of living due to a lack of income tax, the state isn’t cheap when it comes to the final tab of buying and selling a home. In fact, Florida has the eighth-highest average closing costs, including taxes, in the entire country. Before you enter the Florida real estate market, read on for everything you need to know about the additional expenses to include in your budget.
How much are closing costs in Florida?
The most recent data from CoreLogic’s ClosingCorp shows that the average bill for closing costs in Florida — which commonly include a lender’s title policy, an owner’s title policy, property appraisal, settlement, recording fees, land surveys and transfer tax — added up to 2.3 percent of the sale price of a home.
That percentage can add up to very different amounts depending on an area’s typical housing costs. For example, in Sarasota — which tops Bankrate’s list of Best Places to Live in Florida — the median home price in October of 2022 was more than $544,000, so 2.3 percent comes out to $12,512. Head north to Tampa, and the median price tag of $400,000 translates to lower closing costs of $9,200.
However, every real estate transaction is unique. Buyers have an easy path for calculating closing costs: They are spelled out in the loan estimate you’ll receive within three days of submitting your application for financing, and you can compare costs from a few different lenders.
For sellers, the best starting point is your list price. You’re responsible for paying the real estate commissions of both your agent and the buyer’s, which traditionally adds up to around 6 percent of your sales price. So, if you sell your home for $500,000, you’ll pay $30,000 in real estate fees. Your real estate agent can help prepare you for other costs that will fall on your shoulders.
Who pays closing costs in Florida, buyers or sellers?
In Florida, both buyers and sellers pay a portion of a transaction’s closing costs. Certain parts of the state have unique customs when it comes to who pays for what. For example, sellers throughout most of the state will pay for an owner’s title insurance policy for the buyer as a courtesy, but that rule doesn’t apply in four of the most populous counties: Miami-Dade, Broward, Sarasota and Collier. In those counties, the buyer typically covers the cost. Here’s a breakdown of who typically pays for what:
Closing costs for buyers
- Lender fees: When choosing a mortgage lender, pay close attention to how much they charge as an origination fee. On a $400,000 loan, a 1 percent origination fee will add $4,000 to your bill at closing.
- Appraisal: Your lender will require a professional home appraisal to verify the house is worth the price you’ve offered. This will likely run around $500, but it can be higher depending on size and location.
- Insurance and property tax escrow: You’ll likely need to pay a portion of homeowners insurance property taxes upfront to make sure you have enough cash to both protect the property and pay the government.
- Lawyer fees: If you hire a real estate attorney — which you should, given how much money is at stake — you’ll need to pay for their services at closing.
- Home inspection: A home inspection isn’t mandatory, but it’s a smart investment. According to HomeAdvisor, the average inspection costs $341. Depending on what your inspector uncovers, you may be able to negotiate money back from the seller. For example, if you discover that the air conditioner is on its last legs, you might be able to get the seller to cover part of your closing costs, since you’ll have to deal with this expense.
- Prepaid points: If you want to get a lower interest rate to save money over the life of the loan, you can buy points upfront. These are optional but can prove useful, especially in a high-rate environment. You’ll increase your closing costs, but you’ll save money in the long run.
Closing costs for sellers
It’s natural for sellers to think about how much they’ll make from the sale. But it’s important to understand how much it costs to sell a house before you start thinking about what you’ll do with your profits. Closing costs for sellers can include:
- Commission fees: Realtor commissions typically include around 3 percent to the buyer’s agent and 3 percent to the seller’s. So, if you sell your home for $400,000, commission fees would add up to $24,000.
- Documentary stamp taxes: There is no set law on whether the seller pays for Florida’s documentary stamp tax, commonly called transfer taxes in other states. But if the cost does fall to you, the rate is $0.70 per every $100 of value throughout most of the state. On a $400,000 sale, that’s $2,800. The only exception is Miami-Dade County, where single-family homes have a lower rate, $0.60 per every $100 of value, and all other property types have a higher rate of $1.05 per every $100 of value.
- Outstanding property taxes: If you have any remaining property tax obligations, these will need to be paid before transferring ownership.
- Homeowners association dues: If your property is part of an HOA, you may need to pay a prorated portion of fees.
- Lawyer fees: Florida sellers are not legally required to hire a real estate attorney, but it’s a very smart investment. The total bill will depend on your lawyer’s hourly rate and the complexity of the deal.
- Concessions: If the buyer’s home inspection identifies any problems with the property, be prepared for a request to cover a portion of their closing costs.
- Pre-listing inspection: If you want to get ahead of those concession requests, you may choose to conduct a pre-listing inspection to help you identify what might need to be fixed before listing the home. The average inspection costs $341.
- Wire transfer fees: You’ll probably be transferring money to pay off your existing mortgage, so consider how much you’ll have to pay for moving that money from one bank account to another.
Lowering your closing costs in Florida
Just about everything in real estate is negotiable, including who pays for what on closing day. Depending on the local market, you may have more bargaining power to request that the other party pick up part of the tab. For example, if a seller receives multiple offers, a buyer might need to pay a bigger share to be the winning bid. On the other hand, if a home has been on the market for months, a buyer might be able to submit a lower offer and ask the seller to take care of more of the closing costs.
For buyers, it’s important to shop around and compare offers from multiple mortgage lenders to see where you’ll score a lower origination fee, or better yet, no fee at all. Additionally, some lenders may allow you to roll your closing costs into the loan. While this doesn’t actually lower the costs — you’ll be paying them back over time — it will help your budget in the short-term.
Sellers should interview multiple real estate agents to see if someone is willing to accept a lower commission rate. While you’ll still be on the hook for the buyer’s agent’s fee, getting your agent to reduce their rate can make a meaningful difference. For example, if your agent accepts a 2.5 percent commission instead of 3 percent and your home sells for $500,000, you’ll save $2,500.
Find a local real estate agent
Whether you’re buying or selling, finding the right real estate agent is crucial for understanding closing costs in Florida. Every deal is different, and laws can differ from one locale to another. Realtors know their local markets inside-out, and they know how to negotiate the details to make sure your bottom line looks good.
- The home insurance market in Florida is in crisis. Since 2017, many insurance carriers have left the state, gone insolvent or tightened their underwriting restrictions, making it difficult for homeowners to find coverage. Many of the companies that remain have chosen not to renew existing policies, leaving owners in the lurch.
- Fraudulent roofing claims are mostly to blame, and the devastating effects of Hurricane Ian in September 2022 complicated the issue further. According to a report from the governor’s office, Florida accounts for 79 percent of the country’s home insurance lawsuits.
- New insurance-reform laws went into effect in 2022 to try to stabilize the situation, but it may be some time before these laws produce meaningful results, and homeowners could see premiums that exceed several thousand dollars a year. Before you buy a Florida home, consult closely with your real estate agent, and possibly a local attorney, to determine whether the property will be insurable at a cost you can afford.
Sellers in Florida pay more in closing costs than buyers do, because sellers are responsible for covering the real estate commission fees on the deal. These typically amount to about 6 percent of the home’s purchase price.
Closing costs are typically paid at the closing, when funds are transferred and final paperwork is signed. However, you’ll need to make sure you have plenty of cash in your bank account before closing day. A buyer’s lender will look at their finances to verify that they will have enough cash to close.
Typical Realtor fees on a $400,000 sale would be $24,000, all paid by the seller. After that, factor in 2.3 percent of the purchase price to cover the appraisal, taxes, title insurance policies, settlement, recording fees and more. That’s another $9,200, split in some fashion between both parties. Buyers need to consider lender fees, too, which can add to their closing bill.
As a buyer, the best way to lower your closing costs is to shop around and compare lenders to find options that charge low fees for origination, credit report pulls, underwriting and other parts of your application. As a seller, the best route to lowering your closing costs is negotiations: with your real estate agent for a lower commission fee and with the buyer to cover some of the standard closing costs.