3-4% closing cost in Memphis, TN?

[Jimmy Hong]

Hi all,

I'm in process of purchasing a buy and hold property in Memphis but I've been informed by my Realtor that closing cost could be as high as 3 - 4 % for lower priced homes in $100k range.

Can anyone confirm this?

Much appreciated,

Jimmy

[Chris Clothier]

I don't know Jimmy Hong, it sounds like your realtor is probably spot on and pretty close to accurate even though that is just a generic number. I looked back at two recent closings I had and both were roughly 5% and just under 100k. Some of the things to keep in mind - all of this assumes you are using financing:

- Pro-rated taxes for both city and county to fund escrow (depending on the exact location)
- pro-rated insurance, plus one-year insurance escrow
- recording and transfer taxes (should be minimal under $100 each)
- Title search and insurance is a big one that can run up to half a percent.

Here is where it will get interesting and you will have the opportunity to negotiate.

- Lender fees - origination fee, application fee, loan fee, doc prep fee, credit report, inspection fee, appraisal fee just to name half a dozen that you could be charged. Is your interest rate being bought down? That will probably cost you a point right there.

- Legal fees - actual closing charge, doc prep fees, shipping charge, notary fee.

When you add it all up on a low cost property, remembering that the time spent and amount of work is usually very similar regardless if the property cost 100k or 200k then the actual PERCENTAGE of purchase price that the closing costs equals could be high. I would expect to be paying between 4 and 6 percent if I were using leverage and wanting to fully fund my tax and insurance escrow as well as get the lowest rate possible.

If I can do anything for you please let me know, I'd be happy to look at the address for you and let you know what the taxes and expected insurance should be just to have someone else check the numbers your realtor is giving you. Just PM me if you need any help. All the best.

Best of luck with your purchase - Chris