Exposing Closing Costs

The meeting at which the seller and buyer of a house sit down with their lawyers, lenders and real estate brokers to sign the deal is usually a tense session --not least because the two principals do not yet know how much they will have to cough up in closing costs. Under a new federal law taking effect this week, they will be forewarned, if not cheered. The Real Estate Settlement Procedures Act requires that the lender give both buyer and seller an itemized list of closing costs at least twelve days before settlement.

The buyer still faces a bewildering array: fees paid to a lender for processing the mortgage (usually 1% of the note); fees paid to the lender's lawyer for inspecting the title (about $125); fees paid to the buyer's lawyer for doing the same thing and generally making sure everything is according to Hoyle ($150 to $650); and title insurance (about $200), in case title proves faulty despite all the money paid to lawyers to make sure it is not. The seller's big expense is the real estate broker's commission. All together, the Senate Banking Committee estimates, commissions and closing costs averaged $3,000 on single-family houses last year, with the burden falling about equally on sellers and buyers.

The new law does nothing directly to lower costs; it merely gives a buyer or seller some time to object and negotiate. For that reason, Senate Banking Committee Chairman William Proxmire considers it inadequate and is pushing a measure that would have mortgage lenders pick up the costs in lieu of going through disclosure procedures. Of course the lenders would pass those costs along in higher interest, but, Proxmire argues, they would have an incentive to keep the costs down, and have far more bargaining power with lawyers and real estate brokers than the lonely buyer does.

This file is automatically generated by a robot program, so viewer discretion is required.