What Are Washington DC Real Estate Closing Costs?
If you are buying a home in Washington DC, you’ll need to understand the closing process. Washington DC real estate closing costs are a fee many people don’t think about when they are purchasing a new home, but these are costs you’ll have to pay before the property can change hands legally. Your real estate agent will work closely with you to help you through this transition, but there are a few things you should know in advance.
Typical Closing Costs in Washington DC
In most cases, real estate closing costs in Washington DC are about 3 percent of the total sale price of the home. For example, if you agree to purchase a home at a cost of $500,000, you can expect to pay an additional $15,000 in closing costs.
The largest component of these costs is for the DC transfer and recordation tax. In most cases, the buyer will pay for the recordation tax. The seller pays the transfer tax. However, the terms of your contract and final documents will ultimately determine these costs. It is possible that the buyer may be held responsible for paying both of these fees. However, you should know the details of your real estate contract before agreeing to them.
What Does This Fee Cover?
Why should you have to pay thousands of extra dollars in taxes and fees? Closing costs on Washington DC real estate will differ for each property and each company you work with. However, these are some of the expected fees you will pay:
- Transfer tax – This tax is paid to the District of Columbia directly. It is usually 1.1 percent if the home is $400,000 or less. If it is valued higher than this, the rate jumps to 1.45 percent.
- Flat fee – You’ll likely pay a fee to the brokerage of up to $400.
- Broker’s commission – You’ll see some differences here, but in most cases, this is the amount that you agree to pay the real estate agent for listing the home for sale. This is an agreed percentage of the sales price that you and your broker have agreed upon. This percentage is split then between the seller’s agent and the buyer’s agent as their fee.
- Settlement fee – This fee is paid to the settlement agent, who is conducting the transaction. The fee is usually up to $700, but is often less.
- Property taxes – In Washington DC, property taxes are paid in arrears. This means that, at the date of the transaction closing, you’ll have to settle these taxes. Any taxes not yet paid on the property will need to be paid at the time of closing.
- Seller subsidy – In some cases, the seller will provide funds to the buyer to minimize the buyer’s out of pocket costs for closing. If this occurs, which is unlikely in a multiple offer situations, or a hot property that just came on the market, this subsidy go be up to three percent. This is added to the closing costs.
- Utility costs – Bills, such as the water bill, must transfer at some point. You may need to pay this at the time of closing.
Washington DC real estate closing cost calculations will very for each property. However, you can expect to pay a significant amount on the transaction. You’ll also want to determine who, the buyer or seller, will pay each type of closing costs. You can negotiate your contract to include some of these fees.
Find a Real Estate Agent with transfer tax expertise for Free
If you’re Buying or selling a home or condo, consult with an experienced real estate agent, financial adviser, and/or tax counsel to get a true and accurate price on your closing cost and to see if you qualify for any exemptions that can reduce or eliminate your transfer tax.