Closing table confusion: Who pays for what?
Oct. 1, 2018 – In every property transaction, there’s the fairly straightforward purchase price – and then there’s all the other sometimes-confusing costs associated with buying a home.
The Legal Hotline frequently fields calls from members with confused customers wondering exactly what they’re obligated to pay for in a transaction.
Florida Realtors’ most popular contract form, the Residential Contract for Sale and Purchase (“FR/Bar”), lays out these additional costs in paragraph 9, and they can vary depending on which party chooses the closing agent.
This article attempts to clarify one question: Who pays for what? As a practical matter, I highly recommend printing out the pages of the FR/Bar that include paragraph 9 to follow along.
Paragraph 9 covers closing costs, fees and charges associated with the transaction. Specifically, paragraph 9(a) covers costs that will be paid by a seller and 9(b) lays out the costs to be paid by a buyer.
However, upon closer examination, you can see that “who pays for what” largely depends on which box is checked in paragraph 9(c) regarding title evidence and insurance. 9(c) provides three optional boxes, one of which must be checked:
If the box by 9(c)(i) is checked, the seller chooses the closing agent and pays for the Owner’s Policy and Charges. The buyer pays for costs associated with the buyer’s lender, if applicable.
If 9(c)(ii) is checked, the buyer chooses the closing agent and pays for the Owner’s Policy and Charges, in addition to the costs associated with buyer’s lender, if any.
9(c)(iii) is a regional provision for the Miami-Dade/Broward area and effectively splits the costs differently between the parties.
It’s important to note that “Owner’s Policy and Charges” is explained in paragraph 9(c) of the contract and defines those charges to be the owner’s title policy and premium, title search and closing services costs.
In deciding which option to choose, the parties may refer to paragraphs 9(a) and 9(b) to determine what, exactly, they would be responsible for paying in association with the transaction. For example, if box 9(c)(ii) is checked, the buyer can look to paragraph 9(b) to see that buyer is responsible for the Owner’s Policy and Charges and any municipal lien search fee, in addition to the other named costs that are always paid for by a buyer. However, if paragraph 9(c)(i) is checked, the seller pays for those named costs. With paragraph 9(c)(iii) in play, these costs are allocated between the parties: the seller pays for the title search and municipal lien search charges and the buyer pays for the owner’s policy premium.
As you can see, the decision to check a box in paragraph 9(c) carries a lot of weight with regards to “who pays for what,” so it’s important for Realtors to understand this section – but it’s also very important for buyers and sellers so there aren’t any surprised parties at the closing table.
Meredith Caruso is Manager of Member Legal Communications for Florida Realtors
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