Closing costs in Arizona: Who pays for what?

Buying or selling a home in Arizona can be an exciting but complex process, with various costs to consider beyond the sale price. Closing costs encompass fees, taxes, and expenses that both parties must cover before finalizing the deal. The good news is that Arizona ranks among the more affordable states in terms of closing costs, averaging around 1.2 percent of the home’s sale price. In this guide, we’ll delve into everything you need to know about closing costs in Arizona.

Closing Costs in Arizona:

Arizona residents paid an average of approximately $4,700 in closing costs, excluding Realtor commissions. This figure is based on an average home price of $409,930. However, as of March 2023, the median sale price in the state stands at $416,600, according to Redfin. Notably, Arizona is one of several states that do not impose a real estate transfer tax, further contributing to the affordability of closing costs.

Breakdown of Closing Costs:

Closing costs comprise various components, including title insurance, escrow, recording, and mortgage origination fees. While the average closing cost rate in Arizona is 1.2 percent, it’s essential to recognize that costs can vary significantly based on location and sale price. For instance, Sedona boasts a median sale price of $927,972, resulting in higher closing costs compared to Phoenix, with its median price of $410,000.

Buyers’ Closing Costs:

Buyers in Arizona should anticipate covering expenses such as origination fees, application fees, credit fees, mortgage points, appraisal and inspection fees, title fees, recording fees, and prepayment of property taxes.

Sellers’ Closing Costs:

Sellers are primarily responsible for Realtor commissions, which can range from 5 to 6 percent of the sale price. Additionally, they may incur costs for owner’s title insurance, outstanding property taxes, prorated homeowners association fees (if applicable), wire transfer fees, and recording fees.

Negotiating Closing Costs:

Both buyers and sellers have room to negotiate closing costs. For example, sellers may agree to contribute a percentage of the sale price towards closing costs to facilitate the deal. The level of bargaining power depends on factors such as property interest and market conditions. Sellers can also negotiate agent commission fees, potentially resulting in substantial savings, particularly for high-value homes.

Lowering Closing Costs:

Eligible buyers, especially first-time homebuyers, may have access to government-sponsored assistance programs that can cover a portion or all of their closing costs. Some lenders also offer rebate programs. In Arizona, there are various programs like the Home Plus Program, which provides assistance in the form of a silent second mortgage to cover down payment and closing costs. Additionally, discounts on escrow and title fees may be available for specific groups, such as investors or first responders.

Conclusion:

Navigating closing costs in an Arizona real estate transaction involves understanding the various expenses involved and knowing how to negotiate and potentially lower these costs. With the right knowledge and resources, both buyers and sellers can navigate this process with confidence and financial savvy.