Who pays closing costs in Minnesota and Wisconsin?

Various fees and services need to be paid for at a home closing, both by the homebuyer and the seller. These are the average closing costs in Minnesota and Wisconsin:

• Buyer-related closing costs typically range between 2 and 7% of the total home price.
• Seller-related closing costs, which typically include the buyer and seller agent’s commissions, usually range from 6 to 10% of the price of the home sale.

The median sales price in September 2021 for a Minnesota home was approximately $340,000. At this sale price, the average closing costs in Minnesota for the buyer would typically fall within the range of $6,800 – $23,800, and the average closing costs for the seller in the range of $20,400 – $34,000.

Keep in mind, every home sale is unique with varying service providers, negotiations and agreements. So, while closing payments have a typical range for both buyers and sellers, closing costs on a home could vary by several thousand dollars depending on the price and terms of the real estate transaction.

You may be curious about how much money you’ll be expected to bring to the closing table when considering a home sale or purchase. Maybe you’re wondering — how much are closing costs? And what do closing costs consist of, anyway?

Here are some commonly asked questions and explanations to help you better understand typical closing costs, along with instructions on how to calculate your estimated closing costs as a buyer or a seller.

• What are closing costs?
• Common closing costs for buyers
• Common closing costs for sellers
• What are the average closing costs in MN and WI?
• Does the seller assist with closing costs for the buyer?
• Estimated closing cost calculator

What are closing costs?

Any payments that a buyer or seller is responsible for at the time a property sale is finalized, or closed, is considered a closing cost. Most closing costs are paid to service providers that assist the property transaction, such as:

• Mortgage lenders or banks
• Title companies and local county records
• Real estate agents
• Homeowner’s insurance and home warranty companies

What are the most common closing costs in MN and WI for buyers?

Typical closing costs associated with homebuyers include:

• Lender fees. This payment can include loan origination fees, mortgage insurance premiums, prepaid interest on the buyer’s loan, discount points and credit checks.
• Appraisal fees. The home must be in the expected condition and the value must be appraised at the sale price or higher in order for the loan to be approved.
• Title work. In addition to the title, buyers will also often need title insurance and a title exam that searches the property’s title history for claims or liens.
• Homeowners’ insurance. Payment for the homeowner’s first annual premium is typically required.

What are the most common closing costs in MN and WI for sellers?

Sellers also have specific expenses, which are typically deducted from the seller’s proceeds at closing:

• The agent’s commission. In most cases, sellers pay a commission on the home sale to their listing agent’s broker. That broker then pays both the seller’s and the homebuyer’s agent. Each seller will agree to a commission rate with their agent prior to signing a contract to work together.
• Recording fees. These are the required charges from the seller’s local government to file documents from the transaction with the government.
• Taxes. The government also imposes a tax on the transfer of the property, which is calculated based on the sale price. In certain sales, the home seller might have to pay a capital gains tax if their home meets the criteria.
• Title insurance. In a Minnesota transaction, buyers typically pay for title insurance. However, Wisconsin buyers traditionally pay for the insurance for their lender and sellers pay for the owner’s title insurance premium.
• Liens and outstanding fees. If the property has any outstanding liens, unpaid property taxes or the seller has failed to pay HOA dues, a seller may be asked to pay those before the home is able to close.
• Home inspection (or other) repairs. If an issue was uncovered during the buyer’s inspection and the seller agreed to pay for the repair, this amount may be paid at closing.

Sellers should also know that their cost to pay off the loan will be slightly higher than the amount owed on the loan at closing due to interest; the sellers pay this difference at closing.

What are average closing costs in MN and WI for buyers and sellers?

As you can see, various fees and services are paid for at a home closing, both by the homebuyer and the seller. But overall, closing costs won’t be a surprise. Your real estate agent and lender will walk you through each part of a home transaction, including what you’ll owe at closing and why.

While closing costs on each home sale will vary, nationwide estimates show a clear range of what most buyers and sellers will owe. Average closing costs for buyers fall in the 2 – 7% range of the home’s purchase price. And average closing costs for sellers fall in the 6 – 10% range of the home’s selling price.

These price ranges provide a guide to understand how much typical home closing costs are. Still, it’s important to understand that in some cases buyers don’t have to pay their full closing costs. For example, a homebuyer may negotiate that the seller covers some of their costs during a home sale.

Does the seller ever pay the buyer’s portion of closing costs?

Every home sale is different, because every homebuyer and seller has unique desires. Therefore, it’s not uncommon for closing costs to be a point of negotiation between the seller and buyer.

In 2020, the National Association of Realtors collected data to form a Profile of Buyers and Sellers. According to this information, 37% of sellers in the Midwest provided some kind of incentive to buyers last year.

Offering an incentive is part of the negotiation process, and the two most common incentives offered by sellers in the Midwest region were:

• Home warranty policy
• Assistance with closing costs

To provide monetary assistance, sellers might agree to give a percentage of the total closing costs or a flat dollar contribution to the buyer. Once an agreement between the buyer and seller is settled on, the details must be clearly stated within the accepted purchase agreement of the home.

There is one area, however, where sellers tend to pay more at closing — and that’s the agent commissions. In a traditional property transaction, the seller pays their listing agent’s broker an agreed-upon percentage of the home’s selling price. Then, the broker pays out the seller’s and buyer’s agents from money allotted within that commission.

Does the seller have to pay the buyer’s closing costs?

Simply put, no. Sellers are not required to pay any part of the buyer’s closing costs.

However, if a seller isn’t receiving offers for what they feel their home is worth, they may be able to incentivize a buyer by reducing their financial burden at closing. Providing an added bonus to a sale, like paying closing costs, might just be enough to convince an on-the-fence buyer to go all-in on an offer.

How can I calculate my closing costs?

Every home sale is different, with varying service providers, negotiations and agreements. So while closing payments have a typical range for both buyers and sellers, closing costs on a home could vary by several thousand dollars depending on the price and terms of the real estate transaction.

To estimate what your closing costs are as buyer or seller, try out Edina Realty Title’s closing costs calculator.

It only takes 30 seconds to determine your potential costs with this tool. Plus, the calculator automatically breaks your costs into separate categories so you can see where your closing costs are allocated.

Keep in mind, the calculator will not automatically include extra costs that a seller has agreed to pay, such as:

• All or a portion of the buyer’s closing costs
• Other buyer incentives, such as a home warranty policy
• Repairs that the buyer will take on after closing
• Other costs related to buyer negotiations

Confused, or need extra guidance?

There’s a lot to discuss and plan for when it comes to closing costs, so be sure to work with an agent who can support you every step of the way.

Whether you’re looking for help to prep your home for sale or assistance with your budget on your first-ever home purchase, reach out to Edina Realty or one of our agents for expert advice today