11 Easy Ways to Drastically Reduce Your Closing Costs

Don’t sign anything until you read this guide!

When you’re making a huge, expensive purchase like buying a home, it’s easy to just swallow or gloss over all of the various costs and fees that get lumped into it. You shouldn’t! As a homebuyer, you have leverage to negotiate not just the purchase price of the home, but potentially tens of thousands of dollars in additional savings. And it’s easy to do when you understand each fee you’ll be paying and how to go about reducing or removing it altogether.

Closing costs are roughly estimated to be between 2–5% of the purchase price of your home. However it’s much more important to differentiate between pre-paid fees (e.g. property taxes that you’ll have to pay eventually) and non-recoupable fees (e.g. money you’ll pay to an appraiser for work performed). We’re focused on reducing actual, non-recoupable fees.

Here are 11 easy ways that every homebuyer can reduce or remove them, and unlock $50,000+ in savings on a $1M home.

Escrow fees — Don’t pay retail

1. Negotiate a lower escrow fee with the escrow company
2. Sign all escrow documents in person

Even if you’re unable to select the escrow company, you should contact them at the beginning of the process to discuss the fees they charge you. They can usually reduce the rates just by asking them. And if you agree to using electronic documents and sign in-person, you’ll avoid fees for a mobile notary and printing and mailing.

Estimated savings on a $1M home: $2,000

Negotiate ‘who pays what’ with the seller

3. Ask the seller to pay all escrow fees
4. Ask the seller to pay title fees
5. Ask the seller to pay county and city transfer taxes

There are general guidelines for who pays which closing fees based on what’s typical for each city and county. However, guidelines are just that: everything is negotiable!

In your offer or in a counteroffer, you have the ability to suggest who pays each cost. This means that you can request any and all closing costs be paid by the seller out of the proceeds.

Estimated savings on a $1M home: $10,000+

Don’t overspend on inspections

6. Avoid overpaying inspectors
7. Don’t get inspections that you don’t need
8. Requests repairs and credits from the seller

The price for an inspection seems to vary greatly by city and company. Read reviews and shop around to compare rates. Or post the job on Thumbtack and see what bids you get. You certainly want to go with a thorough, reputable inspector but it’s easy to save money with some quick comparison shopping.

You should also ensure you are only paying for inspection services you need. If the transaction doesn’t require a formal report or a full inspection, ask for an hourly rate or reduced price to match the services required.

When an inspector is also qualified to perform any discovered repairs (e.g. a roof inspection performed by a roofing company) you can also negotiate that the cost of the inspection be credited against future work performed, further reducing your overall costs.

Estimated savings on a $1M home: $10,000+

Examine mortgage fees closely

9. Get a mortgage that doesn’t cost you any “points”
10. Look for loans with lower fees

Upfront “points” lower your interest rate but increase your upfront fees and may increase your overall costs depending on how long you plan to keep you loan. Talk with your lender to understand what makes sense for you. Or get pre-approved and compare rates with Sindeo.

When you’re comparing loans, be sure to also look at mortgage closing costs such as an application fee, appraisal, credit report, flood certification and tax services. It also never hurts to ask if any of the fees may be waived.

Estimated savings on a 30-yr loan for a $1M home: $15,000+

Buy with Open Listings!

11. Get a 50% refund on real estate agent commission fees

By far the largest single fee you’ll pay when buying a home is to your agent. For each property sold, the agents representing the buyer and the seller split a commission equal to 5–6% of the purchase price, so each agent gets 2.5–3% of the purchase price in cash at close. (It’s a misconception that the seller pays this fee; it comes out of the money paid by the buyer and is built into the price of the home!)

Traditional agents don’t want you to know that this amount is completely negotiable. When you buy with Open Listings, we’ll automatically give you back half of the commission we receive. This doesn’t just save you money: you’ll get your refund as a credit at closing against your overall closing costs, potentially reducing them to $0.

Savings on a $1M home: $12,500

Learn how much you’ll save buying with Open Listings

Anything we’ve missed? Leave a comment or email [email protected] and we’ll make an update.