Closing costs reduce the amount the seller nets from the sale. Buyers need to know in advance of entering into a home-purchase contract that they have enough cash to cover both the downpayment and closing costs.

Closing costs vary with location. Often who pays what fees — buyer or seller — is dictated by local custom. For instance, in Northern California, buyers usually pay the title insurance premium, while sellers usually pay the premium in Southern California.

HOUSE HUNTING TIP: Some real estate agents use 1 percent of the expected selling price to estimate a seller’s closing cost. This might be close to accurate in some cases. But, there are so many variables that can affect the closing costs in any given sale transaction that it’s preferable to have your real estate agent give you an itemized list of the costs you are likely to pay.

Sellers’ closing costs can include such things as the real estate broker’s fee; transfer taxes, if there are any; costs associated with any mandated compliance requirements; title insurance, in some places; attorney fees, in some cases; closing or escrow agent fees; inspection fees, unless they were paid directly to the inspectors; a home warranty, if applicable; fees for drawing, notarizing, and couriering documents; recording fees; property taxes (if seller has overpaid, the buyer will credit the seller that amount); and homeowner association dues, if there are any.

In addition to the closing costs listed above, the sellers pay off the liens secured against the property and any outstanding interest owed at closing. When you make a mortgage payment, it pays interest owed for the previous month. So, if you were to close on March 1, you would owe the lender interest from Feb. 1 through the date the lender receives the funds, which may not be until a day or so after you close.

With short sales, where the sale price is insufficient to pay off the liens and closing costs, additional closing costs may apply, such as a short-sale process fee charged by the escrow or closing agent. If a third-party short-sale negotiation company is involved, there could be a fee as high as 1 percent of the sale price charged at closing.

Sellers who live in an area where a property survey is required and who customarily pay the cost might have significantly higher closing costs than would a seller in Oakland, Calif., for example, where there aren’t any expensive point-of-sale compliance requirements.

Buyers’ closing costs customarily cover such things as the fees associated with the buyers’ new mortgage; transfer taxes, if there are any; title insurance, depending on the area; homeowner insurance premium for the first year (usually required by the lender); buyer’s broker fee, if appropriate; attorney fees, in some cases; escrow or closing agent fees; miscellaneous fees for document preparation and notarizing signatures; and proration of property taxes and homeowner association dues, if there are any.

Buyers’ closing costs can differ significantly depending on how many points their lender charges. “Points” is a term used for the loan origination fee; one point equals 1 percent of the loan amount. On a $600,000 mortgage, one point would add $6,000 to your closing costs. It would add only $1,500 if you paid 1/4 point, but your interest rate on the loan would likely be higher.

THE CLOSING: Even though local custom usually prevails, who pays a particular closing cost is negotiable.

Dian Hymer, author; reprinted from Client Direct

These new regulations were created in response to complaints by some property owners in the Mission Ranch neighborhood about the impact that “Monster Home” remodeling projects were having on privacy and views.They seek to strike a compromise between preserving neighborhood character and protecting private property rights.

Fremont had considered a total ban on second story additions but relented following public outcry. Instead, 18 months ago they placed a moratorium on additions while City staff studied the issue and developed the new standards. Bay East members and staff testified at Planning Commission and City Council meetings that property owners needed greater certainty in regards to what they can and can’t do with their homes.

Property owners in the Mission Ranch neighborhoods will be able to add a second story to their homes as long as the addition meets certain criteria. Glenmoor owners are allowed to expand their homes but not add a second story.

Reprinted with permission of Bay East Association of Realtors from the Bay East Government Affairs Weekly Report.

These credits apply to the following if purchased between Jan. 1, 2009, and Dec. 31, 2010: Biomass stoves; insulation; heating, ventilation, and air conditioning upgrades; windows and doors; roofs; and non-solar water heaters. The credit allows homeowners every two years to claim 30 percent of the cost of the system, for a maximum credit of $1,500. This credit expires Dec. 31, 2010. Please note that some of these tax credits do not apply to installation costs, and not all ENERGY STAR products qualify for the tax credits. Please consult http://www.energystar.gov/index.cfm?c=tax_credits.tx_index for specifics.

If you’ve decided to purchase small wind turbines, a geothermal heat pump, or a solar energy system for your principal residence or a new home construction, you have until Dec. 31, 2016, to make the purchase. You also can receive a tax credit of 30 percent of the cost (no upper limit).

Check out the following resources:

• Database of State and Federal Incentives for Renewables & Efficiency (http://www.dsireusa.org/): Provides a comprehensive list of all local, state, and federal rebates, tax credits, and property tax reductions for green enhancements to homes and new construction.

• Better Than a Credit: If you participated in the Cash for Clunkers program and purchased a more fuel-efficient car, remember, your $3,500 or $4,500 rebate is not considered taxable income. If you actually purchased a hybrid, you may qualify for an energy tax credit (http://www.fueleconomy.gov/Feg/tax_hybrid.shtml). Cars purchased after Dec. 31, 2010, are no longer eligible for the energy tax credit.

• ENERGY STAR Rebates and Partners: Type in your ZIP Code and find tax exemptions, rebates, or discounts on ENERGY STAR-rated products in your local area–everything from DVD players to water heaters at http://www.energystar.gov/index.cfm?fuseaction=rebate.rebate locator.

Reprinted with permission of the California Association of Realtors

So what’s different this year? Families who need to move are still trying to be settled before school starts in September. However, if families do not

need

to move, they aren’t moving. More and more people are staying put if they can.

How about the ones who are moving? Are they renting or buying? We see more people renting if they are coming out of a foreclosure or short sale. It’s not impossible to buy a home if you’ve been foreclosed upon or completed a short sale, but it is more challenging. Moreover, families are feeling burned by the experience of having their home’s value drop in the last couple of years, and many are shy about buying again.

So who is buying? Investors are always looking, but we are more interested in the families who buy. A lot of the families buying homes are those who felt priced out of the market before, and now they see an opportunity to purchase a home in which to raise their children. These are folks who intend to stay in their new homes for a number of years. Others are families who see a chance now to start small, in a starter home, and move up in a few years when the values rise. This is a very reasonable expectation these days. No one is too sure how the values will fare over the next couple of years, but it is not unreasable to think they will rise above current values within five years. So buying now is a very smart decision.

And who is selling? It will come as no surprise that homeowners who now owe more than their home is worth are selling in short sales. Short sales now comprise a hefty portion of the available inventory. Some of these homeowners have genuinely fallen on hard times and are unable to make their mortgage payments; others have made the financial decision to stop paying their mortgage (known as a strategic default) because it no longer makes sense to pay on a significantly underwater mortgage.

Other sellers are those who were going to sell now regardless of what has happened in the market — traditional sellers who are not short selling. A lot of the traditional sales are couples who planned to retire this year and move to another community or a smaller home. Their home’s equity has fallen in the last couple of years, but they have small (or no) mortgage balance and life goals trump the financial aspects of their home. Yes, they will realize a smaller profit than they would have had they sold a few years ago, but they still want to be in Arizona or near their grandchildren or in a smaller home. Traditional sellers are at a great advantage in the marketplace right now, as buyers who enter into a contract with a traditional seller can be reasonably assured that their transaction will close, and close on time.

The other sellers are the banks selling their foreclosed inventory. This component of the market has been dwindling in recent months as banks heistate to flood the market with distressed inventory for fear of depressing prices even further. We expect to see this change in the coming months, as banks cannot sit on unsold inventory without running afoul of their shareholders’ expectations, and not foreclosing on delinquent mortgages is similarly irresponsible from a financial perspective.

The feeding frenzy that is the typical Spring Buying Season is definitely turned on its head this year, but there is no doubt that the market activity will still take place. It will be very interesting to see how all of the competing needs and expectations of the market’s players come together.

Call us for more information!