Real Estate Closings…..Understanding the Numbers

When I got into real estate almost 9 years ago, I had to go through an 80+ hour class and pass both a class test and state test to get my license and credentials. There was a ton of information that I had to absorb from the legal terminology often used in the paperwork and contracts to the actual process of buying and selling a home. The information I found the easiest to understand were the numbers and math of it all. That being said, I have also found that this is not always the case for my clients. Here is a simplified explanation of what you will want to know when looking at the final numbers at a real estate closing here in North Carolina…

When talking with buyers or sellers about the final numbers, I find that people want to over complicate things. Clients often ask if their deposits go toward their down payment or how much their closing costs will be and if the sellers will cover their closing costs. There are lots of labels and categories on closing paperwork but what clients have to remember is to simply look at the entire picture of numbers as either a credit or a debt.

Looking at the paperwork from a buyer’s perspective, credits are going to be numbers in your favor. These numbers will include things such as any deposits you have already paid prior to closing day such as a Due Diligence Deposit and/or the Earnest deposit. Credits also come from the bank in the form of your loan. This is usually the largest credit a buyer sees on the final numbers and is dependent on the type of loan you are getting and what the agreed terms were of the loan (ie: $200,000 home with a loan of 10% downpayment gets a 90% loan credit of $180,000). Other credits come from potentially negotiated closing credits from the seller.  All of these numbers add together to be a total Credit amount.

A buyer's debts start with the contract price of the home. Just like in our previous example, if the contract was for $200,000 then that is your first debt on the sheet. Other debts will come from what people typically think of as Closing Costs. These costs associated with closing can range from attorney fees to loan origination fees, home insurance premium for the first year, and property tax payments.  All of these things add together to be a total Debt amount.

When everything is calculated, we look at the two total numbers (Debits and Credits) and we see what the difference is between the two. Typically your debts are the largest number and therefore the difference between the two is the amount of money you need to have with you at closing (certified check) or have already wired to the attorney’s account. (ie: Debts on a $200,000 purchase totaled $206,250 and the credits on that purchase totaled $192,000. The buyer would be responsible for bringing $14,250 on closing day). Sometimes, depending on the loan, we do see where the credits are larger than the debts and a buyer will actually walk away with money from the closing, but that is not generally the case.

The real estate process can be a complex one, and closing day has a lot happening and lots of numbers to digest. Try to make it as simple as possible and don’t complicate it any more than it needs to be. Our team at the Kima Real Estate Group is here to help you throughout the process from beginning to end no matter what your real estate needs are. If you are in the Raleigh/Durham area and are looking to buy, sell or invest in real estate, our team is here to help you. Give us a call today (919-300-5421) or check us out online at  chad.WelcomeToCarolina.com