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You’ve settled on a price, signed a contract and started packing up to move into your new Minnesota home — or, if you’re the one selling, to move out of your old one. So what’s left before you complete your real estate transaction? Closing day.
Whether you’re buying or selling a home, the closing will involve signing the final paperwork and paying your portion of closing costs. But how much are closing costs in Minnesota? And who pays them? Keep reading for a breakdown of which expenses you’ll be responsible for at the closing table.
How much are closing costs in Minnesota?
Closing costs vary by state, ranging from less than 1 percent to more than 5 percent of a home’s sale price (not including real estate agent commissions). In Minnesota, average closing costs are on the lower end of that spectrum, at 1.4 percent, according to CoreLogic’s ClosingCorp. That aligns with the typical closing costs in neighboring states, including Wisconsin (1.5 percent) and Iowa (1.6 percent).
According to data from Minnesota Realtors, the median sale price in the state in August 2023 was $349,650. So, for a house at this price, the closing costs would be $4,895. However, your costs may be lower or higher depending on where you’re buying within Minnesota. For example, prices in the Twin Cities region are around $385,000, which would result in closing costs of $5,390. But in the Northwest region, where the median is $160,000, they would be just $2,240.
Who pays closing costs in Minnesota, buyers or sellers?
In Minnesota, as in any other state, buyers and sellers are each responsible for specific closing costs. Let’s break down who pays for what. Keep in mind that, while you aren’t required to hire a lawyer for real estate transactions in Minnesota, it’s smart to do so anyway, and any legal fees you incur will also be due at closing.
Closing costs for buyers
When you’re buying a house in Minnesota, mortgage-related expenses will make up the bulk of your closing costs. Things you’ll need to account for include:
- Loan-related fees: As part of the mortgage process, lenders typically charge fees for processing your application, checking your credit, originating the loan and more.
- Title-related fees: You may need to purchase title insurance, which covers you and your lender if any problems pop up with the property. In Minnesota, buyers and sellers can negotiate who pays for title insurance, but it’s typically the buyer’s responsibility.
- Mortgage registry tax (MRT): When you take out a mortgage in Minnesota, you’re responsible for paying this state-level tax, which costs 0.23 percent of the loan amount. In Hennepin and Ramsey counties, the two most populous in the state, there’s a small additional environmental response fund tax as well.
- Mortgage points: If you choose, you can lower your interest rate by buying mortgage points Generally, every point costs 1 percent of your loan amount and reduces your rate by 0.25 percent.
- Property taxes: Your lender may require you to prepay a portion of your property taxes at closing time. (The funds will be held in escrow for you.) The average property tax rate in Minnesota is 0.9 percent of the property’s assessed value.
- Appraisal and inspection fees: Your mortgage lender will require a professional home appraisal to determine the home’s value. They’ll use this information to make sure you’re not borrowing more than the property is worth. You should also schedule a home inspection (though it’s not a lender requirement), to identify any current or potential problems with the house. If the inspector uncovers anything, you might be able to negotiate with the seller to cover the repairs.
Closing costs for sellers
Sellers are also on the hook for their share of closing costs. These include:
- Real estate agent commissions: In terms of the total cost of selling a home, agent commissions are typically the biggest expense. These usually run somewhere between 5 and 6 percent of a home’s sale price. On a median-priced $349,650 Minnesota home, 5.5 percent comes to $19,231.
- Deed tax: Known as a transfer tax in some states, Minnesota’s deed tax is typically the seller’s responsibility (though it can be negotiated). The deed tax rate is 0.33 percent of the home’s value, or 0.34 percent in Hennepin or Ramsey county.
- Recording fee: There’s usually a fee for recording the new deed with your county. The amount varies by location, but in most Minnesota counties, it’s $46.
- Title-related fees: In Minnesota, sellers usually pay for the title search to make sure there aren’t any liens or other claims on the property. You may also need to buy a title insurance policy to protect the lender and new owner in case any title-related issues come up.
- Seller concessions: Did you agree to any seller concessions (for example, fixing a plumbing issue before the buyer moves in)? If so, the cost will be taken out of your home’s sale price at closing.
- Property taxes and HOA fees: If you have any outstanding property taxes or HOA fees, you’ll need to pay them on closing day.
Wire transfer fee: When you wire funds to pay off your existing mortgage, there may be a modest fee involved.
Lowering your closing costs in Minnesota
Closing costs can add up quickly, but fortunately, you may be able to reduce some of them. Of course, you can’t get out of paying government taxes and fees, but you can negotiate many closing costs.
As a buyer, you can shop around to compare different loan offers to make sure you’re getting the best rate, terms and fee structures. If it’s your first time purchasing a home, you might even qualify for assistance programs to help with your down payment or closing costs. You could also ask for the seller to cover the cost of repairs if any issues come up in your home inspection.
For sellers, your largest expense is also one of the most commonly negotiated: agent commissions. Even a slight reduction in commission — from 5.5 percent to 5.2 percent, for example — could save you $1,000 on a median-priced home in Minnesota.
Find a local real estate agent
Buying or selling a home isn’t always straightforward, which is why it pays to have a local real estate agent on your side. To find a local agent who’ll be a good fit for your needs, ask for referrals from people within your circle who have recently bought or sold property. You can also look online for highly rated Realtors and scan the yard signs you see in your area. Before you hire anyone, interview a few candidates and hone in on their experience with homes similar to yours.
On average, Minnesota closing costs equal 1.4 percent of a home’s sale price, according to data from ClosingCorp. (This doesn’t include real estate agent commissions, which run an additional 5 to 6 percent of the sale price.) The median sale price for a home in Minnesota is $349,60, so closing costs on a sale of that price would work out to be $4,895.
Yes, sellers are responsible for certain closing costs in Minnesota, as they are in every state. The largest of these is the Realtor commissions, which run 5 to 6 percent of the home’s sale price. Other closing costs for Minnesota sellers include a deed tax, recording fee and title insurance policy.