Along with the purchase price, some of the typical fees and costs paid at closing include a title search, title insurance premium, title endorsements, a closing fee, document preparation fees, certificate of existence, wire fees, recording fees, transfer taxes, and bank fees such as an origination fee, tax service fee, flood certification, and appraisal. Additionally, for property that is rented to a third party, rent is usually prorated between the parties. Taxes are also prorated between buyer and seller most of the time. The parties sometimes also pay their respective attorney fees, survey preparation costs, and other expenses incurred during due diligence, at closing.
In a commercial transaction, the buyer and seller are able to negotiate who will pay for which expenses, but in our office, we most often see sellers paying for preparation of the deed and one half of the closing fee, as well as the transfer taxes where applicable. Kentucky charges a transfer tax on most real estate deeds, with certain exceptions, and Indiana does not. The seller is also responsible to deliver clear title, meaning it may have to pay off a mortgage, taxes that are due and payable, or other liens in order to convey title to the property to the new buyer. The buyer most often pays for the title search, title insurance premium, title endorsements, any bank fees associated with a new mortgage, recording fees, and one half of the closing fee, along with most fees incurred during due diligence.
Some sellers are surprised to learn that in Indiana, taxes are paid one year in arrears, meaning that the tax bill you paid this year actually covered last year’s taxes. Therefore, at closing the proration typically requires the seller to give the buyer a credit for the taxes that accrue this year up to the date of closing, so that when this year’s tax bill is sent out next year, the buyer has already received the seller’s portion. Since the tax bill is not sent out until approximately May of the year after taxes accrue, the proration is usually based off of the tax bill for the prior year. In Kentucky, taxes are paid in the calendar year in which they accrue, with discounts available for paying early.