Guide to Closing Costs in Washington State

First-time homebuyers have numerous questions throughout the home buying process, many of which revolve around closing costs. This guide will explain what closing costs are and who pays which closing costs in Washington state.

The quick answer: Closing costs are fees paid by both the homebuyer and seller at the closing of a real estate transaction. Who pays what closing costs in Washington state depends on the negotiation that takes place and the state of the real estate market, but homebuyers can expect to pay between 1 and 3% of the property’s total purchase price. 

What Are Closing Costs?

Closing costs consist of the various fees charged on top of the purchase price of the property during a real estates transaction, such as expenses related to attorneys, taxes, and insurance. While some of these fees are paid at the opening of escrow (when the seller accepts the homebuyer’s offer), most are paid at closing, when the title of the property is transferred from the seller to the buyer.

First-time homebuyers often have a hard time understanding closing costs because certain aspects of them are negotiable or transferable. For example, the homebuyer has no say in the transfer or recording fees charged by the local or state government, but they may be able to negotiate with their lender to reduce the lender’s fee. The homebuyer could also ask the seller to cover some of their closing costs, which is called a seller concession.

The type of closing fees you’ll encounter also depend on your home loan type, further complicating the matter.

[Related: 15 Essential Questions to Ask When Buying a Home]

Average Closing Costs for Homebuyers in Washington State

How much homebuyers pay for closing costs in Washington state depends on the loan type, loan size, local tax laws, any negotiation that occurs between the buyer and seller, and additional factors. However, the average home buyer closing costs in Washington state tend to be between 1 and 3% of the property’s total purchase price.

Luckily, lenders must provide homebuyers with a loan estimate, including an estimate of closing costs, within three days of receiving their loan applications. Homebuyers will also receive a closing disclosure three days before their closing is scheduled, which details the final closing costs to prevent surprises.

[Related: How to Maintain Your Credit Score While Shopping for Mortgage Rates]

Who Pays the Closing Costs in Washington State?

As we explained above, who pays what closing costs in Washington state varies. The largest amount of individual fees usually falls to homebuyers in Washington state, but sellers generally end up paying more because they’re responsible for the costly real estate agent commissions.

The closing costs listed below are based on typical real estate transactions in Washington state. Buyers and sellers may not end up paying all of the costs listed, or they may be faced with additional fees that aren’t listed. For an exact outline of who will pay which closing fees, reference the terms outlined in your specific real estate purchase agreement or contract.

Closing Costs that Buyers Pay for in Washington State

Washington state homebuyers tend to pay for some or all of the following closing costs:

  • Half the escrow fees (buyer’s side closing fees):
    • The exact amount that each side pays is determined between the seller and buyer when creating the purchase agreement.
  • Document preparation fees (when applicable)
  • Fees related to the mortgage loan, such as:
    • Mortgage origination fees
    • Home appraisal fees
    • Mortgage discount points or prepaid interest
    • Credit report processing fees
    • Processor fees
    • Survey fees
    • Flood certification
  • Homeowners insurance premiums prepaid through the first year 
  • Government recording fees for all documents in the homebuyer’s name:
    • These fees help the city or county cover the expense of creating new land records.
  • Lender title insurance fees

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Closing Costs that Sellers Pay for in Washington State

Washington state sellers tend to pay for some or all of the following closing costs:

  • Half the escrow fees (seller’s side closing fees):
    • The exact amount that each side pays is determined between the seller and buyer when creating the purchase agreement.
  • Government excise taxes (when applicable)
  • Any property taxes that are due
  • Real estate agent commissions
  • Prorated homeowners association dues
  • Owner’s title insurance

How the Real Estate Market Affects Closing Costs

One last factor that influences who pays what closing costs: the state of the real estate market you live in. A real estate market can be classified as either a buyer’s market or a seller’s market:

  • Buyer’s market: A buyer’s market is a market in which housing supply exceeds demand. In a buyer’s market, sellers are usually more eager to make a deal, negotiate the home price, and offer seller concessions such as paying for some buyer closing costs.
  • Seller’s market: A seller’s market is a market that has a high demand for housing but low supply, creating a housing shortage. Sellers have greater pricing power in a seller’s market and are less likely to pay for buyer closing costs. Indeed, some buyers will offer to pay the seller’s closing costs.

Washington state currently has a low supply of housing, typical of a seller’s market. Whereas balanced markets tend to have a four- to six-month supply of homes at the current rate of sale, Washington had just a two-month supply in the second quarter of 2019. Although the local government is working on increasing the supply of affordable housing in Seattle, housing availability won’t improve overnight.

This is all to say that Washington state sellers may be less likely to negotiate closing costs, so you may want to offer to pay the seller’s closing costs if you are buying. Of course, every situation is different, and the best way to leverage yours is to work with an experienced mortgage professional who can guide you in the right direction.

[Related: How to Choose the Right Mortgage Broker]

Featured image via Pxhere

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