Washington's housing market has been one of the hottest in the country, as more people are moving into the state because of its economy and climate. But that could change because of the state's stellar employment growth. The population has steadily expanded, reaching about 7.4 million residents as of 2017. The median home value in Washington hit $370,700 as of August 2018, according to Zillow. The site says that figure will rise 6% in the next year as demand continues to heat up. 

While buyers need to consider whether they can afford the price of a home, they should also keep other expenses associated with real estate transactions in mind, including closing costs. Washington has some of the most expensive closing costs in the country. They comprise of lender fees and third-party costs that include appraisals, surveys and credit reports. 

Average Closing Costs in Washington

Typically, the closing costs are anywhere from 2 to 5% of the final cost. The average closing costs in Washington in 2018 was $2,274. This was the seventh-highest average in the United States and was above the national average, which was $2,084. However, less expensive homes tend to have a higher closing cost ratio. Also, the date of the closing makes a difference on the ratio, as interest and property taxes are figured into the exact closing costs.

In Washington, the average origination fees charged by lenders total $966. The average fees charged by third parties involved in the transaction are $1,288, which brings the total average closing costs to $2,254. Washington’s closing costs ranked the seventh-highest in the country and came above the national average of $2,084. New York, Hawaii and Delaware were the highest, all over $2,300. Oklahoma, Wisconsin and South Dakota rounded out the list with the cheapest closing costs in the country under $1,850 each. 

On average, borrowers pay the lender $58 for document preparation, $867 for the origination fee and $77 for tax services. Third-party charges include $533 for an appraisal, $600 for closing or settlement, $25 for credit reports, $10 for flood certification, $100 for postage or couriers and $1000 for a survey. Title insurance fees are not included in these averages because lenders have a difficult time estimating them, but they can add as much as $1,000 to the total closing costs.

What Goes Into Washington's Closing Costs

The loan origination fee is the money that the lender makes for their processing and underwriting of the loan. Although the original fee is approximately 1% in Washington, this is often the most complicated and least transparent fee. The lender may also be paid by the mortgage holder instead, which results in a higher interest rate.

Although sales tax may be considered a closing cost, it defaults as the seller’s responsibility to pay in the state of Washington. This policy differs in other states. As of April 30, 2016, the state excise tax rate in Washington for the sale of a home was 1.78%.

Lenders may require an appraisal to determine the value of property before the lender may finance the property. While a bank or mortgage broker may ensure that the appraisal is completed, the buyer often pays for the appraisal

Title insurance makes sure the seller is giving the buyer a clean title at the time of sale. If the buyer is taking out a mortgage to buy the property, the buyer is required to purchase the insurance. The insurance commissioner regulates title insurance policies in Washington. However, the prices are competitive and vary among companies. A rough estimate of title insurance costs is one-third of 1%. This percentage is slightly lower as the price of the house increases. Properties in Washington that cost $500,000 are likely to have title insurance costing one-fifth of 1%. If both the buyer and seller purchase their policies from the same insurance company, the insurance company may offer a slight discount. The insurance amount covers the amount of the loan, not the full value of the property.

Escrow is a service to account for the money, property and documents during the purchasing process. The price is not regulated in the state of Washington, but the prices are fairly competitive.

Real estate commission is a fee received by an agent for his or her services provided in the transaction. There is no standard commission rate, and no legislation in Washington regulates whether the buyer or seller must pay. While the commission is often classified as a cost of the property, the commission does not occur until the sale is completed, and may approximate 6% of the sale price. Raw land typically results in higher commission rates.

The lender runs a credit report on the borrower, and the borrower is often required to pay for this service regardless of if the loan closes. Each person on the loan application requires a credit check.

A closing or settlement fee is paid for the actual service of closing the transaction. The title company may provide this service, though another closing agency could perform these services. 

The Bottom Line

Washington's housing market has seen significant changes in recent years. As the state's economy continues to improve, demand for housing may heat up, therefore affecting prices and values. Homebuyers will also need to consider what impact that will have on their closing costs. Knowing what goes into these additional charges and whether they can be negotiated may help buyers make more informed decisions in the home buying process. 

Wyoming (WY): Average Closing Costs

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