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Whether you’re buying or selling a home in the Hoosier State, the closing will be the last step of the transaction. By the time you sit down at the closing table, most of the work will be done — but you’ll still have to deal with closing costs, the term for each party’s share of the fees and expenses associated with buying and selling property.
Buyers and sellers both have their share of closing costs to pay, regardless of what state you’re in. Overall, these expenses will total in the thousands of dollars, with some falling on the buyer to pay and some being the seller’s responsibility. Read on to learn the basics of closing costs in Indiana.
How much are closing costs in Indiana?
Closing costs differ in every state. In Indiana, the total amount averages around 0.9 percent of the home’s sale price, according to data from CoreLogic’s ClosingCorp. That’s a fairly low rate: In neighboring Ohio, for example, closing costs run 2 percent of the home’s sale price, and on the other side in Illinois, it’s 2.1 percent.
As of July 2023, Redfin data shows that the median home sale price in Indiana was $258,400 — 0.9 percent of that would yield closing costs of $2,325. Home prices fluctuate greatly across the state, of course. The median price in Indianapolis is near the statewide median at $248,000, for example, while in Bloomington it’s $299,000 and in Terre Haute it’s just $118,000.
Who pays closing costs in Indiana, buyers or sellers?
In Indiana, like any other state, both homebuyers and sellers pay some form of closing costs on a home sale. And while the state does not require a lawyer to oversee home sales, it’s a good idea for both parties to enlist a real estate attorney to protect their interests anyway. Legal fees will be payable at closing, and here’s a rundown of who pays for what beyond that.
Closing costs for buyers
As a homebuyer, most of your closing costs will relate to obtaining a mortgage loan. If you’re able to make an all-cash offer, without the need for financing, your closing costs will be much lower. Indiana buyers typically cover the following lender- and property-related fees and expenses:
- Escrow fees: Lenders often require borrowers to deposit a set amount of prepaid property taxes and/or homeowners insurance premiums into an escrow account, for which they charge maintenance fees.
- Credit, application and origination fees: You may be charged modest fees for your lender to conduct a credit check, process your application and originate your mortgage.
- Mortgage points: Buying mortgage points costs more money upfront, but it can save you money over the life of the loan by lowering your interest rate.
- Title insurance and search: Title insurance comes in two forms. One protects the lender against problems with the title, and another protects the new owner. You’ll also need a title search to check for liens or encumbrances that may interfere with taking ownership of the home.
- Appraisal and inspection fees: Lenders require a professional home appraisal to establish that the amount they’re lending you is in line with the home’s market value. And while a home inspection is not mandatory, it’s smart to have a pro check for major problems, or smaller ones that could snowball down the road. You may even be able to use the results to negotiate the cost of repairs.
Closing costs for sellers
Buyers may pay most of a home sale’s closing costs, but sellers usually run up a bigger tab. Real estate commissions, which typically run between 5 and 6 percent of the home’s sale price, account for most of that sum. For a median-priced $258,400 Indiana home, 5.5 percent comes to $14,212.
Unlike many states, Indiana does not charge a transfer tax to transfer ownership of the property, so sellers don’t have to worry about that expense. Closing costs sellers are on the hook for, though, typically include:
- Title fees: Like buyers, sellers may also need to pay some title-related fees.
- Property taxes and HOA fees: These get charged right up until closing day. If you owe any outstanding property taxes and HOA fees at that date — for example, if they’re due on the 1st of the month and you close on the 20th — you must pay those at the time of closing.
- Mortgage payoff: Do you still owe money on your existing mortgage? If so, that amount will be deducted from the sale price to pay the mortgage company, likely with a small wire-transfer fee tacked on.
- Seller concessions: In order to facilitate the sale, many sellers agree to pay a portion of the buyer’s closing costs or other expenses.
- Home warranty cost: Some sellers offer to pay for a home warranty for their buyers to sweeten the deal, especially if the home’s appliances and systems are nearing their lifespan.
Lowering your closing costs in Indiana
A lack of transfer tax means Indiana’s closing costs are already that much more affordable than other states’. And while there’s nothing you can do about government fees and taxes, most other closing costs are negotiable. Your success will vary depending on local market conditions. For example, buyers may not have much leverage in a seller’s market, where sellers have the upper hand, and in a buyer’s market, the reverse is true. Remember that real estate commissions are often negotiable as well.
Find a trusted real estate agent
An experienced local real estate agent can make a world of difference on your real estate journey, whether you’re buying in Indianapolis or selling in South Bend. Ask family and friends for recommendations, and look up each candidate’s reviews online. The more an agent knows your specific area in Indiana, the better, so prioritize candidates who have recently closed deals nearby. Interview several individuals before settling on the right person to work with.
Yes, sellers pay some form of closing costs in every state, including Indiana. These can involve various fees, but the largest portion will be the commissions due to the real estate agents who handled the sale.
Title insurance, which protects in the case of ownership issues such as liens on the home’s title, is paid for by the buyer in Indiana transactions.