Closing costs are a fact of life when purchasing or selling a home in Los Angeles. If you’re buying a home in L.A., you should expect closing costs to be between 2 percent to 5 percent. Sellers, on the other hand, can expect to pay between 5 percent and 10 percent in closing costs. While Hawaii has the highest closing costs in the country, California isn’t far behind. It’s not necessarily that the percentage points are higher, but if you consider that the median home price in Los Angeles is over $600,000, it’s not surprising at all.

Luckily, you won’t be caught off guard by the price tag when you close. You’ll receive a Good Faith Estimate (GFE) from your lender and paperwork explaining all of the final closing costs. This happens well before you close on your home. You can also understand what to expect in general so you can make an informed decision.

Closing Costs for Buyers in Los Angeles

While the seller pays a higher percentage of closing costs, as the buyer, you’ll face more line items. Unless you have negotiated with the seller to pick up some of your closing costs, these are some of the fees you can expect to pay.

The most expensive fee you can expect to pay at closing is likely to be the loan origination fee. This is a one-time fee the lender charges for processing your loan application, usually between 0.5 percent and 1 percent of the purchase price of the house. So a $500,000 home would likely incur up to a $5,000 loan origination fee.

While it’s not required by California law, your lender will likely require you to prepay homeowners insurance for a full year when closing on your new home. Surprisingly homeowners are not required to have insurance by the state, but considering that 5,700 buildings have burned in Northern California’s most recent fires, it’s easy to see why it’s a lender requirement.

Other fees you can expect to pay to include an appraisal fee, bank processing fee, tax servicing fee, recording fee, notary fee, and title insurance. These are all smaller costs, but put them all together and they’ll quickly add up. When figuring out the cash, you’ll need to close, be sure to consider all of these potential costs, so you know the best way to negotiate your offer.

Closing Costs for Sellers in Los Angeles

While the loan origination fee is the largest one paid by the buyer, it’s not the most significant overall closing cost. The commission on the sale of a home is the most significant single expense in the entire process, and the seller pays for it. In Los Angeles, the average commission on the sale of a home is around 6 percent. While the commission is split between the buying and selling agents, the sellers pay the commission on the sale of the home at closing. On a $500,000 house, that comes to $30,000. Other fees paid by the seller may include any unpaid property taxes and homeowners association fees or dues.

What to Expect When Closing on a Home

Expect to sign a lot of documents when closing on a house, whether you’re buying or selling. Real estate transfer documents, such as the deed, bill of sale, and affidavit, will all need to be signed. Home loan documents also need to be signed at closing. These can include the mortgage, loan application, and loan estimate, among others.

There’s a lot that goes into purchasing or selling a home whether you’re in Los Angeles, New York, or elsewhere. Having an idea of what to expect can make the experience less painful while minimizing surprises.

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