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In any real estate transaction, the last thing that happens is the closing. This is where the buyer and seller each pay their share of the fees and expenses, also known as closing costs, that are part of a real estate deal. Closing costs can come to as much as 2 to 5 percent of the loan amount, not counting agent commissions.
In Ohio, as in most states, closing costs can include fees related to the mortgage loan, title search, appraisal and any applicable taxes. Although the buyer pays most of these costs, as the one taking out the loan, the seller is not off the hook. If you’re thinking of buying or selling a home in Ohio, here’s what to know.
How much are closing costs in Ohio?
The average rate of closing costs varies by state. According to data from CoreLogic’s ClosingCorp, that rate in Ohio averages 2 percent of the home’s sale price, not including agent commissions. That’s on the high side — neighboring Indiana averages 0.9 percent, for example — but by no means the highest in the country.
The median sale price in the state was $249,400 in June, according to Redfin data, which puts median closing costs for an Ohio home at just under $5,000. But since these estimates are based on home price, actual costs will fluctuate depending on the local market in your Ohio location. The median price in Columbus, for example, is higher at $290,000, while in Cleveland it’s a surprisingly low $119,950.
Who pays closing costs in Ohio, buyers or sellers?
In any state, including Ohio, both buyers and sellers pay some form of closing costs on a real estate transaction. Many of these expenses vary by region within the state. For example, according to Ohio Real Title, the cost of an owner’s title insurance policy is split between buyer and seller in Northeast Ohio but paid by the seller in Central Ohio. Keep in mind that if you choose to hire a real estate attorney, the legal fees will also be your responsibility. Here’s a breakdown of who typically pays for what.
Closing costs for buyers
For buyers, most closing costs relate to obtaining a mortgage loan. Therefore, if you are a cash buyer, your closing costs will be much less. Here are some typical fees and expenses buyers cover:
- Loan application and origination fees: Lenders often charge fees to process your application and initiate your home loan.
- Credit report: Similarly, many lenders charge a modest amount to check your credit.
- Appraisal: Also required will be a professional home appraisal — the lender needs to establish that the home is worth at least what they’re lending you.
- Mortgage points: It’s possible for borrowers to get a lower interest rate, which saves money over the life of the loan, by buying mortgage points upfront. Each point typically costs 1 percent of the loan amount and lowers the rate by 0.25 percent.
- Home inspection: Home inspections are not technically required, but it’s smart to get one. Your inspector will look for major problems, or minor ones that could become major down the road, and you can potentially use the results to negotiate the cost of repairs.
- Title insurance and search: There are two types of title insurance policies — one to protect the lender against problems with the title, and another to protect the (new) owner. A title search checks for liens or encumbrances.
- Escrow: You may be required to deposit a set amount of prepaid property taxes and/or homeowners insurance premiums into an escrow account, for which a maintenance fee will be charged.
Closing costs for sellers
While buyers might pay the bulk of a transaction’s closing costs, sellers have costs to cover as well. In fact, the total amount paid by the seller usually far exceeds that paid by the buyer, due to real estate agent commissions, which typically run between 5 and 6 percent of the home’s sale price. For a median-priced $249,400 Ohio home, 6 percent comes to around $15,000. Other common fees for sellers include:
- Transfer taxes: These taxes, which cover the transfer of property ownership, vary by state. Ohio’s transfer tax, also called a conveyance fee, runs $1 for every $1,000 of value for the property. Individual counties may add an additional amount.
- Recording fee: You’ll likely pay a modest fee to record the new deed with the county recorder’s office.
- Title fees: Title-related fees can sometimes fall on the seller’s shoulders.
- Outstanding property taxes and HOA fees: Sellers must pay any outstanding property taxes and homeowners association fees, if applicable, due at the time of closing.
- Concessions: If you agree to any seller concessions — paying for a needed repair, for example — the amount is usually subtracted from the sale price at closing.
- Existing mortgage payoff: If you still owe money on the mortgage when you sell, that amount is also deducted from the sale price and wired to the mortgage company. You may pay a modest wire transfer fee.
Lowering your closing costs in Ohio
Obviously, government fees and taxes are not up for debate — but most other closing costs are negotiable. The local market will determine how successful you might be. In a seller’s market, where sellers have the upper hand, buyers might not have much leverage, and the reverse is true in a buyer’s market.
Sellers should keep in mind that their largest expenditure, Realtor commission, can typically be negotiated regardless of market conditions. And buyers may be eligible for any number of financial assistance programs that help cover the cost of a down payment and closing. If you’re a first-time buyer in particular, Ohio offers many assistance programs that can help you lower homebuying costs.
Find a local real estate agent
Whether you are buying or selling, it’s smart to hire a local real estate agent who knows your market well. Seek advice from friends and acquaintances, especially those who have bought or sold recently in your area. Check websites and reviews. And interview several candidates, asking plenty of questions, before deciding on the right person to work with.
Buyers and sellers both have some expenses in a real estate transaction. Besides paying for the actual house, buyers typically pay costs associated with taking out a mortgage loan, including origination and application fees and the cost of a professional appraisal. Sellers, meanwhile, pay the agents’ commissions and any applicable state and county transfer taxes, among other things.
Yes and no. According to ClosingCorp, Ohio closing costs average around 2 percent of a home’s sale price. While that rate is on the high side, the state’s median sale price is actually on the low side at $249,400, according to Redfin — that’s well below the nationwide median of $396,100. So the two actually balance each other out pretty nicely.