Learn How To Budget For Closing Without Surprises

What Closing Costs Should Buyers And Sellers Plan For?

Ready to stop guessing what you’ll owe on closing day? We dig into the dollars that rarely make the listing sheet—earnest money, inspections, appraisals, title insurance, lender fees, prepaids, and escrow reserves—and show how to predict them with a simple 2 percent rule of thumb. With four decades of experience guiding military families and local buyers, Lori Thompson walks through real examples on a $500,000 home and explains when it makes sense to negotiate seller credits that trim thousands off your upfront cash.

We also flip the script for sellers. You’ll learn how commissions and buyer‑agent co‑op offers affect traffic and net proceeds, what to budget for title insurance and closing fees, and how to handle repair requests without derailing your sale. With rates still elevated, Lori breaks down the 2‑1 buydown—lower payments in year one and two, then the note rate—and why sellers are often the ones funding that credit. She even shares a smart counter strategy: adjust price to cover concessions while keeping the appraisal supported by solid comps.

Market conditions decide who pays what, but preparation decides who wins. We talk timing for earnest money, why a sewer scope can save you thousands, how prepaids differ from fees, and when programs like CHAFA can ease cash pressure for first‑time buyers. Whether you’re budgeting as if no credits will come or mapping a seller net sheet before you list, this guide helps you walk to the table calm and confident.

If this helped clarify your path to closing, follow the show, share it with a friend who’s house hunting, and leave a quick review with your biggest closing‑cost question so we can tackle it next.

To learn more about RE/MAX Properties Inc. visit:
https://www.LoriThompson.REMAX.com
RE/MAX Properties Inc. 
Colorado Springs 
719-332-1807 

Transcript

SPEAKER_02 0:03

Welcome to your Colorado Springs Life Home, where real estate means real time. Maybe a little too much coffee. Hosted by Remax Properties licensed realtor broker and top producer Laury Thompson. A local legend who's been helping military families and civilians buy itself for over 40 years. Whether you're PCSing, upsizing, downsizing, or just a dream, Lori's got you covered. Why? Because she's your lifetime realtor. And she actually answers her phone. Imagine that.

SPEAKER_01 0:45

The purchase price isn't the whole story. Closing costs can make or break your budget if you're not prepared. Welcome back everyone. Frederick, co-host and producer in the studio with Remax Properties licensed realtor and broker, Lori Thompson. Lori, hope your week's been treating you well.

SPEAKER_00 1:04

Not too bad. How are you doing?

Buyer Costs Vs Down Payment

SPEAKER_01 1:06

Good, good. Thanks for asking. Lori, shall we dive right in? What's great, great. What closing costs should buyers and sellers plan for?

Earnest Money Essentials

Inspections And Sewer Scope

Appraisals And Rule Of Thumb

Estimating Buyer Closing Costs

What Sellers Typically Pay

SPEAKER_00 1:16

Well, there's a whole bunch of different costs that can come up. So what I'm going to try to do is split it into two categories. The first one is what does a buyer need to be prepared for? Now keep in mind closing costs are different from down payment. So I want to just quickly touch on some of those, okay? VA loans don't have a down payment, but they do have closing costs. FHA loans are typically 3% down, and conventional can be anywhere from 3% to 25% down. So a lot of it just depends on what type of loan you're going to have as far as the down payment. The first thing up front that most people are not necessarily prepared for is earnest money. And earnest money is good faith money, and that's a deposit required at the time that you go under contract and you can schedule a due date for the earnest money, but typically it's 1% of the purchase price. So if you're buying a$500,000 home, the earnest money will on average be$5,000. And that's held in trust at the title company. Now that money will apply towards the purchase price later on if everything goes smooth. So you're going to put your earnest money deposit. The second and one of the most vital steps that I strongly encourage people never ever to skip is the home inspection. Depending on what you get in the home inspection, I would plan anywhere from$400 to$700. I always recommend people include a sewer scope, and that's oh, maybe an extra$100,$150. But the sewer line is the owner's responsibility from the house all the way out to about the middle of the street. And no one has X-ray vision. So you want to make sure that that sewer line is in good repair because those expenses can be very costly. So if you take a basic home inspection and you include radon testing and let's say uh a sewer scope, then you're closer to the six to seven hundred dollar price range, but it can save you thousands if you find problems. If you find those problems, you have two choices. You can terminate the agreement, you're out whatever you paid for the inspection because that's an independent third party. Or the other option is you say, Mr. and Mrs. Seller or whoever the seller is, we are asking you to take care of this, this, this, and this. And it can be anything from a hail damaged roof to uh non-operating GFCI switch to furnace cleaning and inspection to mold mitigation. I mean, there's so many things that a good inspector can come across. And um I I would not personally buy a house without a thorough home inspection. So the last upfront cost that you can think of is uh uh the appraisal. And there you're gonna plan on anywhere from$800 to$1,000 for an appraisal that is for the purpose of your lender making the mortgage on the property. And so let's take the example again of this$500,000 house. Typically, you're gonna put$5,000 in earnest money, but that's gonna come back at the time of closing. And if you were to do kind of a rule of thumb, the total closing costs for a buyer average about 2%. So if you're buying a$500,000 house, plan on between$9,000 and$10,000 in closing costs. Now, also keep in mind that you can negotiate some of that, depending on how long the house has been on the market, how motivated the seller is, you can negotiate to have the seller pay some of your closing costs. So those are just kind of a thumbnail sketch. But when I say that 2%, that includes your home inspection, that includes your VA FHA or conventional appraisal. For the seller, it gets a little bit more ambiguous. You would negotiate a commission with whatever realtor you're hiring to market your home. You would determine what kind of cooperation you would be willing to pay the buyer's agent. Then it's not unusual for a buyer to ask for closing cost concessions, and those can run between five and ten, and I've seen them as high as$15,000. Um, that's on top of the commission. So a lot of times sellers will take, oh, this is the price of my house, and we'll take this commission, and those can't be set by law. I would like to point out commissions cannot be set, they're always negotiable. Then you would have the concessions the buyer asks for, and then I always recommend people put aside a buffer for home repairs. The seller typically pays for the title insurance, and that can be anywhere from one to$2,000 on average, half of the closing fee. Let's say the closing fee is$300, half the closing fee is$150. So what I do is I always do an estimated net sheet for my sellers, and I say, okay, here is a typical transaction, and this is what I want you prepared for. Because I don't like surprises, and I want my sellers to know up front, this is what you need to be prepared for. Here's my estimate, this is what you'll walk away with.

Common Fees And Prepaids

SPEAKER_01 7:01

Wow, that's really thorough and detailed information. Thank you so much for that. You did mention, you know, things like appraisal fees, setting money aside for inspections, those things. Uh, are there any uh very common closing costs that buyers should expect? You know, anything other than what you've already mentioned? And also how do lender fees, title fees, and prepaid items factor into the final amount that's due?

SPEAKER_00 7:26

Yeah. Well, you know, I mentioned that 2% amount, um, 2% of the purchase price if you wanted to use a rule of thumb. That includes title fees, underwriting fees. That is a really, really good rule of thumb on what to prepare for. So just think if you're a buyer, think 2%, hopefully less. And that includes lender fees, title fees, prepaids to pay a year of insurance up front, plus escrow reserve. Then they'll set up an escrow reserve for some of the taxes. So that is an all-encompassing amount. And currently we do have a lot of inventory, and it's not unusual for buyers to request seller to pay$6,000 towards buyers' closing costs. So if you have$10,000 in costs, if the seller agrees to play pay six, then you know that you will owe the difference.

SPEAKER_01 8:24

Wow, that's very helpful. Thanks for that. Um, so are there programs or any strategies that help buyers reduce or negotiate their closing costs?

SPEAKER_00 8:34

Um, well, if you're using an FHA or a conventional mortgage, there is a first-time home buyer program called CHAFA. And CHAFA, which stands for the Colorado Affordable Housing Authority, I think it is, or Colorado Finance Authority. Anyway, this CHAFA is a 3% loan that you can get to offset the down payment, and it's due when you sell the house. So it will crop up later, but it can help people if they don't have a lot of money save for a down payment. And there's other types of programs out there, but that's the most common one is a CHAFA loan.

Seller Expenses And Co‑Op Strategy

SPEAKER_01 9:14

Gotcha, gotcha. Thanks for that. So you did touch on some of the seller costs as well earlier, but uh what expenses should sellers in general anticipate and how do those differ from buyer costs?

SPEAKER_00 9:27

Usually seller uh would be paying the commission. And I always encourage my sellers to offer a co-op to the other broker because it increases the amount of activity you get on your home and in the long run can help you get more money, not less. Uh, title insurance fees, one to two thousand dollars for title insurance, any buyer concessions, typically half the closing fee. So, like I said, it's just each contract is negotiable.

SPEAKER_01 10:01

Gotcha, gotcha. So, how do market conditions influence whether buyers or sellers cover more of the closing costs?

Negotiation Math And Appraisals

SPEAKER_00 10:10

If there is a lot of inventory, then the buyer is more likely to negotiate concessions paid on behalf of the seller. Likewise, if there's a lot of homes for sale, the seller has to be prepared to pay concessions. Now, lately, since the interest rates have gone up so much, there's a lot of people who are looking into something called a 2-1 buy down. Let's say the interest rate is 6%. On a 2-1 buy down, the first year would be at 4%, the second year would be at 5%, and years three through 30 would be at 6%. Well, if you do a 2-1 buy down, the buyer cannot pay for that buy down. The seller would have to pay if they agree to that particular offer that includes a 2-1 buy down, in which case the seller should be prepared to pay once again around$10,000 to help get that interest rate lower for the buyer. So it can be done a couple of different ways. I I like to have that set fee. Let's say you're asking$500,000 and they want$10,000 in concessions. You could always negotiate to split the difference and counter back at$505,000 and agree to pay the$10,000, in which case you've kind of split it because the buyer is taking a higher mortgage and you're getting$5,000 less on your net. But when you do that, you have to make sure that you have enough comparables that you feel comfortable getting your appraisal through. Or if the seller really wants to get out of dodge and get on with their life, whatever the circumstance, they might just agree to pay those concessions with the offer. And that's why it's really important to have a realtor who will do an estimated net sheet because you need to know what the numbers are, what they look like, and what to prepare for.

SPEAKER_01 12:04

That is actually a perfect segue to my next question. Um, so you did mention you don't like your clients to have any surprises or anything. So what advice do you give to clients to help them budget confidently for closing day?

Budgeting Smart For Closing Day

SPEAKER_00 12:19

Don't always count on the seller concessions. Save up as much as you can to put yourself in a position to be a shrewd negotiator. If you are a buyer, you're working with a realtor, always ask them to do a comparative market analysis so you know that you are going to make an offer that corresponds with the market. A lot of people are like, oh, well, we'll just throw a low offer and see if they'll take it. Sometimes if you come in too low, you've destroyed your negotiating power because they are so insulted, they just say, well, they say lots of things, trust me. But uh, they'll just reject your offer. So the key is what are you looking for? Are you looking for the price reduction? Are you looking to have them cover some of your closing costs? Would you like a little bit of everything? Well, then you need to determine with your realtor what is a fair market value so you know how to negotiate and how to do it effectively.

SPEAKER_01 13:22

Wow, that is really detailed and wonderful feedback. Thank you so much for that. And that does bring us to the end. So, Lori, I just want to say thanks for helping us understand the financial side of closing with a lot more clarity. We really do appreciate your insight. And for everyone at home, thanks for joining the journey, and we will see you all again next time.

SPEAKER_00 13:41

Bye-bye.

Sign‑Off And How To Reach Lori

SPEAKER_02 13:46

That's a wrap for this episode of Your Colorado Springs Life at Home. Got questions? Need advice? Just want to talk about interest rates and granted countertops? Call or text Maury at 719-332-1807. Yes, she'll really respond.com to get started with your lifetime realtor. Because when it comes to Colorado real estate, Maury doesn't just know the market, she is the market.