Who Pays? Buyer & Seller Costs

It’s going on 18 years since my baby-doll Faith Makanalani was born. Of course, I think she’s amazing. It’s not just her beautiful blonde hair but the strength of her character, her strong confidence and her incredibly soft heart that continue to amaze me. It’s hard to believe that when she was born, Chris and Mealoha decided they did not want to know if their baby was going to be a boy or girl. The concept is hard for me because surprises aren’t welcomed in my line of work.

How Much?

I can assure you that when it comes to selling property, most buyers and sellers want to know ahead of time what their costs will be. Traditionally, buyers and sellers share the costs of transferring property. Realistically, almost every cost is negotiable but the rule of thumb is, “he who benefits pays.” Here’s how the logic works.

For Pests?

Take, for example, the termite inspection. The inspection is negotiable, but many lenders still require proof that the home is free of Hawai`i’s hungriest pest. Even if the buyer’s lender requires the report, termites are the proud possession of the seller, so the seller is generally expected to pay for that inspection along with any required treatment. Sellers need to assure buyers that the house is free of their termites, so seller benefits because they are getting rid of unwanted “guests.”

For Title?

Applying this type logic to the “benefit test” seems to help when attempting to sort through the laundry list of charges which accrue. Title insurance is a shared cost with the seller normally paying 60%. Title insurance transfers the risk of loss resulting from unknown or undisclosed title issues from the property owner to the title insurance company, thereby releasing the seller from liability related to title issues. Buyer benefits because their interests are protected. Charges for the escrow company handling the property transfer details are normally shared 50-50. Sellers generally pay the commissions.

Other Costs?

Remember, there are normally no up-front costs for selling a home. Commissions, survey costs, termite inspections, even tenting are normally deducted from seller’s proceeds. Buyers pay for drafting their own mortgages and for loan fees unless the seller specifically agrees to contribute toward some of these.

Our purchase contract contains a sample list of other possible charges. Each transaction differs slightly but your agent should provide you a detailed cost estimate specific to your situation. And, even though I thought no belated Christmas present could be as good as Faith, after 10 grandchildren, I’ve learned to accept that some surprises can be perfect…. none, however, have to do with real estate.

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