Closing is the final stage of a real estate transaction. The sheer amount of paperwork involved in the process can make you feel flustered and overwhelmed, especially if you are buying or selling a house for the first time.
A rookie mistake that most first-time home buyers and home sellers make is not taking closing costs into consideration. To be specific, who pays closing costs in Alabama, and how much are they?
Why are Closing Costs Important?
Paying closing costs is important to finalize the real estate transaction. For instance, top mortgage lenders in Alabama typically require a home appraisal report and home inspection reports to determine the net worth of the property, and the loan amount and calculate the risk involved. Without these, they may not approve the loan.
Closing costs are also important to transfer the ownership of the house from the seller to the buyer. To understand this better, let’s consider the recording fee. It is charged by state and/or local government agencies to register the real estate sale, making it a matter of public record. Not recording the sale can be a gateway to legal liabilities in the future.
That being said, it is crucial to develop an understanding of closing costs before you begin a real estate transaction. If you are selling a house, it will help you find the right price for your property without narrowing your profit margins.
If you are buying a house, being well-versed in closing costs can help you establish your affordability.
Who Pays Closing Costs in Alabama: Buyer or Seller?
Both the buyer and the seller have to pay certain closing expenses in Alabama.
Seller closing costs in Alabama can amount to 8%-10% of the final sale price of the home. This does not include the mortgage payoff. The biggest closing cost (5%-6%) the seller has to pay is the listing and buyer’s agent commission. The remaining 3%-4% includes expenses like home inspection fees, land survey fees, HOA fees, estoppel fees, etc.
» Seller Closing Costs: Find out what are typical closing costs for seller in the US.
Usually, the buyers are responsible for paying most of the settlement costs in Alabama. Buyers closing costs in Alabama can amount to 2%-5% of the final sale price of the home or the mortgage amount.
Buyers can negotiate certain closing costs with the seller and the lender. Some sellers may offer to pay certain buyer closing costs to sweeten the deal or sell their home faster.
» Closing Costs for Buyers: Here are the typical closing costs for buyer in the US.
Who Usually Pays Closing Costs in Alabama?
As mentioned above, the buyers are responsible for most of the settlement costs. However, the closing costs to be borne by the buyer and the seller vary by transaction type. Let’s take a look at the buyer and seller closing costs by transaction type.
Who Pays Closing Costs for Cash Buyer in Alabama?
Cash buyers in Alabama do not have to take a mortgage to finance their real estate purchases. As a result, cash deals benefit both the buyer and the seller as they are quicker, less risky and complicated, and have lower closing costs.
Both the seller and the buyer have to bear certain closing expenses in a cash sale.
Some seller closing costs on a cash sale in Alabama are attorney fees, closing/settlement fees, escrow fees, HOA fees, pro-rated property taxes, title insurance, and transfer tax.
Since the buyer does not opt for a mortgage in case of a cash sale, they do not have to pay lender-related closing costs like application fees, appraisal fees, credit report fees, discount points, lender’s title insurance, and underwriting fee. Buyer closing costs on a cash sale in Alabama include attorney fees, courier fees, escrow fees, homeowners insurance, HOA fees, title search fees, transfer tax, and property tax.
Who Pays Closing Costs in Alabama on a Wholesale Deal?
Three parties are involved in a real estate wholesale deal, the seller, the wholesaler, and the buyer. The wholesaler acquires the property from the seller on contract and sells it on their behalf. Wholesalers often look for distressed properties priced below market value. Such deals are usually low risk and present the opportunity to make a larger profit in a shorter time span.
The seller and the buyer pay closing costs in case of a wholesale real estate deal in Alabama. The wholesaler is not responsible for closing costs. However, they may have to pay taxes on the assignment fee (monetary compensation wholesalers receive for organizing the deal, usually a percentage of the final purchase price).
Some seller closing costs on a wholesale deal in Alabama are attorney fees, escrow fees, HOA fees, transfer tax, and pro-rated property tax.
Buyer closing costs on a wholesale deal in Alabama include appraisal fees, assignment fees, escrow fees, owner’s title insurance, recording fee, the survey fee, title search fee, etc.
Who Pays Closing Costs on a Vacant Land in Alabama?
Land is a tangible asset, and its value only increases with time as it has a limited supply. In addition, this niche of real estate is less competitive as compared to wholesale deals and house flipping in Alabama.
Both the buyer and the seller have to pay some closing costs on the sale of land in Alabama.
Seller closing costs on land sale in Alabama include attorney fees, deed preparation fees, HOA fees, pro-rated property tax, real estate agent commission, recording fees, transfer taxes, etc.
Some buyer closing costs on land sale in Alabama are appraisal fees, attorney fees, environmental inspection, land survey fees, loan application fees, origination fees, soil percolation test fees, title insurance, and title search fee.
Who Pays Closing Costs on a New Construction Home in Alabama?
Purchasing a new construction home means buying a house directly from the builder or developer. Here, the buyer is the first person to live in the house since its construction.
Usually, the buyer has to bear all closing costs in Alabama on new construction. Nonetheless, the builder may offer certain incentives towards closing costs to make the property more attractive, especially if the buyer chooses to work with their in-house lender.
Buyer closing costs in Alabama on a new construction include attorney fees, deposit registration fees, development fees, harmonized sales tax, loan origination fees, meter installation fees, notary fees, pro-rated property taxes, real estate broker commission, settlement fees, transfer taxes, and Tarion enrolment fee for new homes.
How to Lower Closing Costs in Alabama?
Alabama has some of the highest closing costs in the United States. Let’s put this in perspective. The median home price in Alabama is $273,500. So, the closing costs for seller in Alabama typically range from $21,880 to $27,350. And, closing costs for buyer in Alabama can amount to $5,470-$13,675.
» How Much are Closing Costs in Alabama: Here’s everything you need to know about the closing costs in Alabama for buyers and sellers.
How to Lower Closing Costs for Seller in Alabama?
If you are putting your house on the market, here are some ways you can reduce the cost of selling a house in Alabama.
1. Opt for a discount broker or a flat fee realtor
Compared to traditional brokers who charge 6% of the sales price as commission, discount real estate brokers in Alabama only charge 3%-4% of the sales price for their services. In fact, some low-commission realtors offer higher concessions if sellers choose them as their buyer’s agents for their next real estate purchase.
2. Choose “For Sale By Owner” (FSBO)
Sellers can save up to 3% realtor commission and cut several costs by opting for “For Sale By Owner” services. Houzeo offers services like Flat Fee MLS for FSBO sellers. With Flat Fee MLS, sellers can list their property on the MLS, which makes the selling process easier and smoother. What’s more, if the buyer is unrepresented, with Houzeo, sellers can sell their homes for zero realtor commission charge!
» Best FSBO Sites: Check out the best For Sale By Owner websites in 2022
3. Research and compare
Sellers can save on closing costs such as attorney fees, home inspection fees, and escrow fees by researching and comparing more affordable services to find the one most suitable for them.
4. Ask the buyer to cover seller closing costs
Buyers may agree to cover the seller’s closing costs if the market is competitive and fewer houses are in the market. On the other hand, sellers can raise the listing price to cover full or partial closing costs.
How to Lower Closing Costs for Buyer in Alabama?
If you are putting your house on the market, here are some ways you can reduce closing costs for buyer.
1. Opt for a rebate program
Some real estate brokers offer buyers incentives like rebates that help lower their closing costs and/or buy down the mortgage interest. Real estate agent services are free for buyers as sellers pay the agent commission for both parties.
2. Give a solid offer
Present an attractive deal to entice the other party to cover some of the closing costs. Although it doesn’t mean more proceeds, an irresistible offer can reduce expenses. The better the offer, the more they’ll want to accommodate the deal. Hence, there’s a great chance the seller will pay the added cost to keep the transaction easier and quicker.
3. Minimize requests
Making demands can make the deal slow and troublesome for both parties. Therefore, buyers should make minimal requests so the seller will be more willing to cover some of the closing costs. If there are too many inconveniences, the seller may question the genuineness of the buyer and feel the need to back out.
4. Ask the seller to cover closing costs
Depending on the market conditions, the buyer can negotiate the deal with the seller. They can the seller to cover some of the buyer’s closing costs or offer credits toward closing costs.
Closing Cost Calculator Alabama
Closing costs vary heavily according to location and mortgage rates. Houzeo’s Closing Costs Calculator is a free tool that factors in these elements to help you calculate closing costs in Alabama. It shows the user a detailed list of itemized costs and highlights junk costs that can be avoided.
Houzeo’s Home Sale Calculator Alabama helps calculate closing costs for sellers with a swish and a click! All the sellers have to do is enter their property location, home sale price, mortgage payoff, seller agent commission, and buyer agent commission, and voila!
» Seller Closing Costs Calculator Alabama: Check out the seller closing costs calculator for calculating the closing costs for seller.
Houzeo’s Buyer Closing Cost Calculator helps calculate closing costs for buyers in Alabama. To find the estimated buyer closing costs, the buyers have to add the property location, home purchase price, and the down payment in the buyer closing cost estimator.
» Buyer Closing Costs Calculator Alabama: Check out the closing costs calculator for buyer for calculating the closing costs for buyer.
If you have not begun your real estate journey yet, opt for Houzeo. Houzeo.com, a tech company, provides an unbeatable combination of maximum savings, cutting-edge technology, and 5-star customer support.
With its 100% virtual service, it helps home sellers list their properties without any hassle from the comfort of their homes while also allowing home buyers to explore properties and make offers online.
Houzeo’s customer-centric approach, advanced technology, and flat fee packages make it an ideal choice for those looking to avoid paying high commissions and closing costs.
» Houzeo Reviews: Check out Houzeo.com’s reviews before listing your house!
Frequently Asked Questions
1. Who pays transfer taxes in Alabama?
Transfer taxes in Alabama are typically paid by the seller. In Alabama, transfer taxes are called documentary stamp taxes.
2. Are Alabama property taxes paid in arrears?
Yes. Property taxes in Alabama are paid in arrears (at the end of the year).
3. Is a survey required for closing in Alabama?
No. The law in Alabama does not mandate a land survey when buying or selling a house. However, it may be required by mortgage lenders and title companies.
4. Who pays owner's title insurance in Alabama?
The seller usually pays for the owner's title insurance in Alabama.
- How to Sell My House Fast Alabama: Selling a house in Alabama takes approximately 70 days from list to close. But that’s only if you get offers fast and there are no hiccups in home inspection, appraisal, and closing. Here’s how you can sell your house fast and for more cash.
- How To Sell a House By Owner in Alabama: Planning to sell your house on your own? Check out this guide!
- Flat Fee MLS Alabama: Top 7 companies that list your house on the MLS for a flat fee with reviews.
- Selling a House As Is in Alabama: If you want to sell your house in Alabama without incurring any repair charges, then check out this blog on the ‘as-is’ approach.
- Seller Disclosures in Alabama: Check out the seller disclosure requirements in Alabama.
- Best Real Estate Websites Alabama: The majority of homebuyers and home sellers go through a real estate website before reaching out to a realtor. Read our list of the top real estate websites in Alabama.
- Top Real Estate Companies in Alabama: Check out the top real estate companies in Alabama who can guide you in your real estate journey.
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