The Real Truth About Delaware Closing Costs When Home Buying

“Wow, closing costs are high in Delaware” until you understand the comparisons.

Are the closing costs in Delaware truly higher? Are they comparing apples to apples?

Real Truth about Delaware Closing CostsLet’s define closing costs but also talk about other costs and fees incurred when you buy a new home.

“Wow, closing costs are high in Delaware,” one of our clients recently commented. During the day we had visited with on-site salespeople at several of our new home communities. In builder speak, anything not included in the actual purchase price of the home is referred to as “closing costs.” Well, this is not entirely true.

I like to use the analogy of dining out today. Do you remember when you ordered dinner and it came with soup, salad, and dessert? Today, you’re lucky if your entrée even comes with vegetables and a potato. It’s kind of the same thing with a new construction home in many new communities, especially the new active adult communities full of amenities.

Let me be more specific

I have talked a lot about this topic over the past 10 years and have several relevant articles and videos we’ve done that should be helpful. But here, let me use the KISS METHOD and try to keep it simple:

The real Closing Costs

There are costs associated with the purchase, financing and title insurance of any home purchase. Wherever you purchase a home, these closing costs are standard and can include:

  • Loan origination charges
  • Loan processing fees
  • Appraisal and inspection fees
  • Attorney’s fee
  • Deed preparation
  • Title Insurance for both the lender and the owner

Other Costs and Fees

But there are other costs and these can vary greatly depending on whether you are buying a new or resale home and in which community or location in Delaware. These costs can include:

  • Transfer Taxes. In Delaware the total on all real estate transactions is 4%. 1 ½% goes to the County or City in which you are buying and 2 ½% goes to the State. Now, this is important:

If you are buying an existing home, the 4% is split between the Buyer and the Seller. BUT, if you are buying new construction, you may be responsible for the whole 4%.

  • If you are financing, the lender will require prepaids including homeowner’s insurance for several months and property taxes for 6 months. These are placed into escrow accounts, usually by the lender.
  • Other Costs and Fees– this is the section that varies the most and can include:
    • Pro-rated HOA or condo dues and fees.
    • Capital Contributions, if applicable. This one-time fee can range from hundreds to as much as $5,000 or more and is due at settlement. In most planned communities or active adult communities, the capital contribution is applicable.
    • Water and Sewer Impact Fees. These fees apply only to new construction and are paid once. The developer or builder may pass on the cost of connecting to water and sewer. These fees also vary greatly. I have seen numbers from $3,000 to $8,000—depending on the community.
  • Miscellaneous Fees
    • Recording Fees
    • Document Preparation Fees
    • Wire Fees or FedEx charges
    • Reimbursements for surveys and even the termite inspection

So, if you hear someone say: “Closing costs are high in Delaware,” ask them “Compared to what?” If they are comparing closing costs on a new construction home in a community with all the bells and whistles to their last home they purchased 20 years ago or more, that’s comparing apples to oranges.

Do you have more questions about buying a home in Delaware? Contact one of our experienced Active Adults Realty agents, or request your copy of our new Delaware Home Buyers Guide today!

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