Closing Costs - Normal for PA?

Question

After 2 years of "getting ready", my wife and I have finally made an offer on our first deal!

I recently attended a BP Meetup Group where a group of ~20 great people analyzed the deal, and many of the seasoned pros felt the closing costs were way too high. However, since these investors were not active in Pennsylvania (where this investment is located), they suggested reaching out to the forums for help.

I am purchasing the property for $60k in Carlisle, PA, with conventional 20% down, 30-year financing with 0 points.

The 3 closing cost estimates we received are:

• Realtor: $3,874
• Local Community Bank: $3,839
• National Lender: $5,090

For investors active in the Carlisle/Harrisburg area, is this what you are used to seeing? Why do the title-related fees vary so greatly? If these fees are high, any advice for getting a better deal?

Thank you all for your help!

Expense

Realtor Est.

Local Bank Est.

National Chain   Est.

Loan   Origination Fee

$    900

$  -

$  990

Application   Fee

$  -

$  270

$  -

Document   Preparation Fee

$    250

$  265

$  -

Underwriting   Fee

$  -

$  265

$  -

Appraisal Fee

$    460

$  550

Appraisal   Management Fee

$  -

$  90

Credit Report   Fee

$    40

$  63

$  22

Tax Service   Fee

$    95

$  110

$  75

Recording Fee   (Deed + Mortgage)

$    170

$  240

$  -

Notary Fee

$    30

$  20

$  -

Sub-total of Fees Above

$    1,945

$  1,783

$  1,727

Title   Insurance/Endorsements

$    924

$  -

Title Closing   Protection Letter Fee

$  -

$  125

$  -

Title   Electronic Document Delivery Fee

$  -

$  49

$  -

Title   Endorsement Fee

$  -

$  300

$  452

Title Lenders   Coverage Premium

$  -

$  699

$  680

Title   Overnight Delivery Fee

$  -

$  21

$  -

Title-Tax   Certification Fee

$  -

$  50

$  -

Title Owners   Coverage Premium

$  -

$  50

$  774

Title   Settlement/Closing Fee

$  -

$  850

Sub-total of Title Fees Above

$    924

$  1,294

$  2,757

Property   Inspection

$    325

$ 325

$  -

Pest /Termite   Inspection

$    55

$  150

$  -

Flood   Certification

$    25

$  12

$  7

Sub-total of Inspection Fees   Above

$    405

$  162

$  7

State Transfer   Tax (half share)

$    600

$  600

Total Closing Costs

$    3,874

$  3,839

$  5,090

Steve Babiak · Answer

The middle column for the inspection fee column has an incorrect total; my math says it should total to $487 not $162

The biggest disparity between the three is under the title fees. So maybe you should try to resolve why each of those sources has the number they have given you. It could be that one of them is missing something, it could be that another is including something twice or even unnecessarily.

Kevin Felmlee · Answer

Seems high. I'd suggest calling David Galloway @Walters Galloway in Mechanicsburg PA  about doing settlement. He can save you some of the title fee's etc.  He does my settlements.

Chris K. · Answer

Hi @Matthew Holtry: welcome to BP!

For the expenses, I would say most of them are fine. At some point, you can perhaps go negotiate with your lender about it, but you probably don't have enough clout yet for that. Note that from the lender's perspective, the amount of work they have to do to close on a $60k home is not too different from a $300k home. So in my experience, cheaper properties tend to have a higher closing cost proportionate to the purchase price.

For the title fees, what I would do is actually contact your title company to get the fees. If I have to guess, I would say that out of the three estimates, the local bank is probably the most accurate. Now the national lender may be including stuff like attorney's fees in the "Title Settlement/Closing Fee." But its estimate for "Title Owners Coverage Premium" is most likely way off. I have to assume that's a typo. Once you bring that down, the three estimates should be around the same ball park.

In the bigger picture of things, the closing costs in PA tends to be higher than most other states for various reasons. While the percentage depends on the sale price, I typically tell folks to assume around 8 percent for most deals involving a standard loan. Note that it can easily break 10 with higher taxes and the amount of RESPA escrow you pay at closing.

Patrick Liska · Answer

Aside from the 3 you mention i Have not been charged an Appraisal fee by my bank or the tax service fee. so all 5 cost you $915 that i have not had to account for, which if not included in the numbers would be about 4.3% of the cost of the house.

Pete S. · Answer

@Steve Babiak thanks for the quicktip

Steve Babiak · Answer

Wow, something strange happened there - I typed a reply after the above quote but it turned out blank.

Anyway, @Pete S., you don't have to add a post to a topic in order to get updates; click on the "Follow" link near the top of the thread and you will be emailed whenever a post is added to the thread (unless you are the one adding the post of course).

Matthew Holtry · Answer

@Patrick Liska - It's a great name! :o)

Thanks for checking on everything here. We are going with the national lender so the first set of fees ends up right around $1,700. Property + Pest Inspections are going to run $400. Transfer taxes will be $600. So those alone put me at $2,700.

I am going to work with my Realtor and title company to see where we end up on the title-related expenses. Unfortunately, I think I am going to end up close to $3,700 to close on this property. I will keep trying to do what I can do to get the costs lower, but this might end up being a little bit of money paid for the learning experience.

Patrick Liska · Answer

Matthew,

That's my sons name btw, my averages did include the lenders origination fee, i just checked, but each loan has a different fee amount, i guess depending on how much you borrow. Like i said, mine is an " average" of all my closings, some are little higher and some a little lower than 4.5%, but that will give you a close budgeting number. as a matter of fact, just about every number you listed have varied on each of my closings, so there is no set number that it will be every time, that's why using an average will get you close. because mine did not include inspections, i think you could use about 5% of the purchase price, that would put you at about $3000

Matthew Holtry · Answer

@Chris K. I called the lender who gave me that quote, and she said she is 100% sure it is $50 so that is good to know.

Based on all the input from everyone here and following up with these lenders (as well as a few others), my key takeaways are:

• Title-related closing costs will probably be in the $900-$1,300 range (since these were provided by individuals in the "local" market who know the area a bit better). The national lender also said he had to shoot high so he didn't have to come asking for money later.
• I am hoping (but not planning) for the Realtor estimate to be the most accurate since he is a very experience agent in the area and has also helped us find a title company.

@Patrick Liska - Does the 4.5% estimate include a lender's origination fee? If not, adding another $900 on top of your estimate fills in the remaining gap to explain the difference.

Expense	Realtor Est.	Local Bank Est.	National Chain Est.
Loan Origination Fee	$ 900	$ -	$ 990
Application Fee	$ -	$ 270	$ -
Document Preparation Fee	$ 250	$ 265	$ -
Underwriting Fee	$ -	$ 265	$ -
Appraisal Fee	$ 460	$ 550	$ 550
Appraisal Management Fee	$ -	$ -	$ 90
Credit Report Fee	$ 40	$ 63	$ 22
Tax Service Fee	$ 95	$ 110	$ 75
Recording Fee (Deed + Mortgage)	$ 170	$ 240	$ -
Notary Fee	$ 30	$ 20	$ -
Sub-total of Fees Above	$ 1,945	$ 1,783	$ 1,727
Title Insurance/Endorsements	$ 924	$ -	$ -
Title Closing Protection Letter Fee	$ -	$ 125	$ -
Title Electronic Document Delivery Fee	$ -	$ 49	$ -
Title Endorsement Fee	$ -	$ 300	$ 452
Title Lenders Coverage Premium	$ -	$ 699	$ 680
Title Overnight Delivery Fee	$ -	$ 21	$ -
Title-Tax Certification Fee	$ -	$ 50	$ -
Title Owners Coverage Premium	$ -	$ 50	$ 774
Title Settlement/Closing Fee	$ -	$ -	$ 850
Sub-total of Title Fees Above	$ 924	$ 1,294	$ 2,757
Property Inspection	$ 325	$ 325	$ -
Pest /Termite Inspection	$ 55	$ 150	$ -
Flood Certification	$ 25	$ 12	$ 7
Sub-total of Inspection Fees Above	$ 405	$ 162	$ 7
State Transfer Tax (half share)	$ 600	$ 600	$ 600
Total Closing Costs	$ 3,874	$ 3,839	$ 5,090

Closing Costs - Normal for PA?

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