Closing costs vary by location Whether buying or selling, be prepared for surprises

Closing costs, the costs associated with buying or selling a home, can add up. It's wise to get an estimate of how much you're likely to pay in closing costs before you make an offer to buy a home or accept an offer to sell.

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 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; closing or escrow agent fees; inspection fees, unless they were paid directly to the inspectors; a home warranty; 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.

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. If closing on March 1, the lender would be owed interest from Feb. 1 through the date the lender receives the funds, which may not be until a day after closing.

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.

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 ¼ point, but your interest rate on the loan would be higher.

THE CLOSING: Who pays a closing cost is negotiable.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."