Real Estate 101
Closing Costs: What they are and who pays
Whether you’re buying or selling real estate, closing costs will be part of the transaction. Learn who pays for what.
Whether you’re buying or selling commercial real estate, closing costs will be part of the transaction. The good news is you can prepare for what to expect so that when it comes time to sign the deal, you — and your bank account — will be ready.
What are Closing Costs?
Closing costs are the fees paid for services that are needed to complete a real estate transaction. This could be a residential home, a commercial property or a piece of land. These costs become due when the buyer’s funds become available as payment for the property and both parties have signed the transaction closing documents — usually on closing day.
Commercial Closing Costs
When it comes to commercial closing costs as opposed to residential, sellers are most often responsible for closing costs. Commercial closing costs typically include the following items.
Property appraisal. The asking price for a commercial property can be tricky to figure out, and a professional real estate appraiser can be a big help in this process. Often, you might pay about $5,000 for an average-sized commercial property appraisal, but this can be $10,000 or more for larger buildings or lots.
Property inspection. Both a seller and buyer of a commercial property can have their own licensed commercial inspection performed to address any concerns about issues with a property’s condition. This can help with pricing and negotiations.
Property repairs. Generally, property repairs consist of issues such as electrical or mechanical systems in occupied areas along with any problems in the building’s exterior and common areas, like the bathrooms and roof. The inspection report will come in handy when deciding what to do here.
Other commercial property closing costs include:
- Agent/broker commission. The average commercial property commission is about 4-8%
- Marketing expenses (e.g. staging, photography/videography, advertising)
- Outstanding property debt
- Title or other selling fees
Here is a list of common commercial closing costs along with who typically pays for them.
Real estate agent commission fees
Property appraisal fees
Property inspection fees
Title or other selling fees
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