March 24th, 2023
When buying or selling a home, there’s a lot of planning and preparation involved, including preparing a budget. And as you’re probably aware, a real estate transaction can involve quite a few expenses, one of them being escrow fees. These fees are charged by an independent third party, a.k.a. the escrow company, to handle the transfer of funds and documents between the buyer and seller. But who pays for these fees? And how much are they?
Not to worry, we’re here to explain how escrow fees work, how much they are on average and who is responsible for paying them in the state of California. So, if you want your real estate transaction to go over smoothly and avoid any surprises along the way, keep reading to learn more about your expenses.
So, when dealing with a real estate transaction, one of the crucial escrow terms you need to understand is ‘’escrow fees’’. But what exactly are they? Simply put, escrow fees are associated with the purchase and sale of real estate. They are paid for services rendered by an escrow company that handles the entire escrow process from start to finish.
Escrow fees are typically paid at closing and may be incorporated into the buyer’s closing costs, or split between the buyer and seller of a property. The amount of the fee can vary depending on factors such as location and type of loan, but more on that later.
Escrow fees in California are typically calculated based on the purchase price of the property being sold. The fee is a percentage of the purchase price and can vary depending on the location of the property and the escrow company you choose to work with.
In addition to the purchase price, other factors that can affect the escrow fee include the complexity of the transaction, the type of property being sold, and any additional services requested by the parties involved.
For instance, if there are multiple contingencies, such as inspections or repairs, that need to be fulfilled before the transaction can close, this can increase the complexity of the transaction and result in a higher escrow fee.
Furthermore, if you are selling a commercial property rather than a residential property, the escrow fee can be significantly higher due to the added complexity of the transaction.
Escrow fees are an unavoidable expense when buying or selling a property. In California, the fee amount will depend on the purchase price. On average, you’ll pay $2 per $1,000 plus the escrow company’s base fee. So, if you’re purchasing a home for $500,000, your escrow fees would be $1,000 plus about $200 for the base fee.
It's important to note that escrow fees in California may also include other charges like notary fees, wire transfer fees, and courier fees, among others. As these additional fees can quickly add up, it's crucial to carefully examine the escrow estimate provided by your escrow agent to fully comprehend the charges and avoid any surprises.
Typically, in California, the buyer and seller split the cost of escrow fees. However, this is not always the case, and the payment of these fees can be negotiated between the parties. In some cases, the seller may agree to pay the entire amount, or the buyer may agree to cover the cost.
In some cases, the payment of escrow fees can also depend on the location of the property. For example, in some counties in California, it is customary for the seller to pay for certain fees, including escrow fees.
While escrow fees are an essential part of the real estate process in California, there are ways to reduce these fees and save some money. Here are some helpful tips:
The world of escrow requirements, fees and paperwork can be pretty overwhelming for both buyers and sellers. So, how do you make sure you do everything right? Well, you don’t have to worry about that. All you need to do is hire an experienced escrow company and let them carry the weight. Experts will be in your corner during the entire process, so you can rest assured that everything will go according to plan.
Lightspeed Escrow is an escrow company with over 20 years of experience and countless success stories. Our number one priority is making sure that our clients have a smooth and stress-free real estate transaction. Our job is to handle the entire escrow process, your job is to sit back and relax while we take care of everything. So, contact us today and make the home selling/buying experience easier than ever.