Are there differences in closing costs between new homes and resales? Kathy Sperl-Bell, of Active Adults Realty in Delaware, discusses the different fees that make up the closing costs when you buy a home. Would you save more if you buy resale? The answer may shock you!
Is there a difference between closing costs on a new home versus a resale home in Delaware? Hi, this is Kathy Sperl-Bell, Active Adults Realty in Delaware, and this is an excellent question and one we try to review with our clients, especially those that are from out of state, because closing costs do vary from state to state, but they can also vary greatly within a state depending on the location and the type of community, and yes, whether or not it’s new construction.
I have written a more detailed blog post about it, but let me go over some of the highlights with you. Components of closing costs in Delaware include the Delaware transfer tax and that tax is now 4% of the total purchase price. Typically on a resale, that is split between the buyer and the seller. With new construction, sometimes it is, sometimes it isn’t. Again, I’m going to suggest you go to the written blog post that goes into more detail about that.
But other than the transfer tax, some other potentially larger items would include fees associated with your mortgage. For example, if you’re going to get a VA loan, there is a funding fee that can be as high as 3%. Totally depends on the type of mortgage that you are going to get.
The next category would include any capital contribution or impact fee. What’s a capital contribution? If you’re going into one of these active adult communities with all the bells and whistles, clubhouse, pools, tennis courts, pickleball courts, there is likely to be some kind of a capital contribution. This goes into the escrow account that starts to accrue funds for future repairs, future maintenance, and so it can range greatly from, I don’t know, a few hundred to several thousand dollars.
Then there could be what’s called impact fees. A brand new community, there are costs to put in the infrastructure, to put in the roads, put in the water and sewer system. There are a couple of different ways that developers can recoup those costs. One of them is an impact fee that would be charged at settlement. Again lots of detail, but we’re just going over the highlights.
There could be special taxes instead of an impact fee. There could be special taxes charged over a period of time 10, 20, 30 years that would recover again some of that costs for infrastructure.
Let me look at the categories and then compare new construction to resale homes. The transfer tax, the biggest potential difference is that on a resale I’ve never seen it not be split between the buyer and the seller. That’s negotiable but 2% for the buyer, 2% for the seller. New construction, many of the builders, especially now that it is a very healthy market are not really splitting the transfer tax so it could cost you 4%.
Prorations of taxes, water and sewer, that would be the same whether it’s new or a resale. Any loan origination, appraisal, credit report, things like that would be the same. Attorney’s fees, title search, those would be about the same. The real estate commission, if it’s new construction, paid by the builder. If it’s a resale, paid by the seller, the homeowner. Your homeowner’s insurance would be about the same. Your HOA fees would be about the same. Your capital contribution would be the same whether you’re the first purchaser or the second, third or fourth.
Now, if it is a special tax where you’re reimbursing for a bond or reimbursing for infrastructure costs over a period of time, on the resale, you would be responsible for the remaining years. If it was a 30-year bond and it is in the Heritage Shores in Bridgeville, and it’s a 10-year-old home, you’re responsible for the remaining 20 years. It doesn’t start over.
There’s a difference also if they go water and sewer impact fees in a community because those are paid for by the first owner, not subsequent owners so that can be significant if you buy a new home in a community that has an impact fee that’s 10 or $12,000. Obviously buying resale is a significant saving.
Every community is different and things can change so this is something you need to check carefully, talk to your Active Adults Realty agent and they will make sure to help you evaluate communities, not just on the purchase price, but on the cost to go to settlement and the cost to live there.
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