Buyer's Estimated Costs

Buyer's Estimated Costs is a RESPA law mandated document to be signed by the buyer(s) before closing. This is the agent's best estimate on what the costs will be for the transaction. It's not going to be exactly accurate, and that's why it's just an estimate. As a buyer's agent, you should be giving an estimate on closing costs at the initial consultation with their max price, as well as the sales price BEFORE they sign the offer. A lot of buyers don't realize how many other costs they have besides the sales price. See below for a video, or scroll down for written instructions.
The form is titled "Buyer's Estimated Costs" and it's a PAR document. Search your templates for "BEC" for the correct form. Please remember to save frequently in case it times out or crashes. It's a lot of numbers to have to redo. You can save the flat numbers into the template to save time, as well. 
  1. The first step is verifying the correct municipality and sales price. A lot of the closing costs are based off the sales price and will vary. It's always important to verify with the county website that the property was listed correctly on the MLS. IF they are different, go with the county website because agents often publish incorrect tax data. City of Pittsburgh runs on a regular calendar year for school taxes. The others are due in July on a fiscal year. This example will use $250,000 sales price and City of Pittsburgh taxes.
  2. Title Insurance is the first line on 1A and there are automatic calculator sites to save you some math. It's based on the sales price, but there's a few options. For an owner occupied sale, you want to recommend they get the Enhanced option to cover them the most. For investment use, they cannot get the enhanced and have to do the "non-enhanced" price. Take the number it gave you and put it on the sheet, and check off the corresponding box.
  3. The Closing Protection Letter is $0. (line 1B)
  4. The Title Enhancements are about $185 in Allegheny County. Again, it's just an estimate. (line 1C)
  5. Mechanics Lien Insurance is $0. (line 1D)
  6. Settlement Notary Fees vary depending on the title company. A good high end estimate is $250, but you can ask your preferred title company what their costs are. (line 1E)
  7. Recording Fees are $181 for cash and $181 for mortgage. Total (line 1F)
  8. Transfer Taxes are based off the sales price and the municipality. Usually they are added up and split in half, but read your contract on how that's split up since it is negotiable. Detailed instructions here: Transfer Taxes. Transfer taxes have 3 parts: municipality (vary), school (vary), and state (1%). City of Pittsburgh is 3%, City of Pittsburgh School District is 1%, and the state is 1%. Total of 5% transfer tax(as of Spring 2020) of the sales price, but that is usually split in half between the buyer and seller. For this example, the sales price is $250,000. 5% of $250,000 is $12,500 for the total. Split in half, your buyer is paying $6250. 
  9. Surveys are not required by PA, but are usually paid outside of closing if your buyer wants one. You can put $0 or POC for Paid outside of closing. It could be a cost they have to pay before closing, but this sheet is detailing what they're bringing to the closing table. (line 1H)
  10. Domestic Lien Search (line 1I) is $0.
  11. Patriot Act Search (line 1J) is $0.
  12. Line 1K is blank for anything else you need to add. 
  13. Line 2 is the Broker's fee. For The Dustin Nulf Team, we usually collect an administrative fee on every deal. For buyer clients: If the seller is paying only 2.5% of the commission, but the buyer (your client) signed a BAC saying they would pay 3%, you need to include that additional amount on this line. The amount paid by the seller is listed on the MLS, so you always know what you're getting before closing. The agent should get a copy of the MLS Full Photo print off into your file before submitting an offer to have record of what the commission was offered. This is explicitly 
  14. Property Insurance First Year's Premium (line 3A) should be based off an insurance agent's estimate, or ask your buyer to get a quote. You can put $1200 as a place holder since it does depend on different things. The $1200 represents a year's premium of the policy.
  15. Lender Escrow (line 3B) can vary by lender, but 2 months worth is normal. Just take your 3A line and divide by 6 to get two months worth. 
  16. Section 4 is the Adjustments (aka where prorations are). Taxes can be a little tricky (lines 4A to 4C) because they come in threes. It easier to put it on one line when doing school, county, and municipal taxes in the City since they are on a yearly basis.The buyer pays taxes for the day of closing and for the rest of the year, by reimbursing the seller on the closing docs. See the link for more information: Taxes. The taxes are based upon the "Full Year Based Market Value" which is the left hand side value on the county website and NOT the sales price of the property. Figure out the daily rate (that yearly rate divided by 365) and how many days are left in the year for the amount the buyer has to pay at the closing. This is going to be different if the taxes are not collected on the same day. It's important to remember that the assessed value will raise the following year, especially if it's a big difference between the sales price and the assessed value, and therefore the taxes will also raise. Remember to inform your clients about this. This example has the $3301 as the total amount of taxes for the rest of the year.
  17. Lender Escrows (line 4D) varies depending on the lender, but you can put 1 month's taxes into that line if you don't know.
  18. Association Fees (lines 4E and 4F) is for if there is any Homeowner's Association to be paid monthly or yearly. That would be something to check with the listing agent, but usually you can find that out on the MLS.
  19. Lienable Utilities (line 4G) are usually the seller's expense, but if it's negotiated in the contract include it here. If it's not in the sales contract, $0.
  20. Inspection Fees (section 5) are usually paid before closing. You can put POC or $0 on this line, but if your client wants those inspections, they will pay upfront to the vendor. Those prices vary so you should talk to an inspector.
  21. Lender costs vary depending on the loan and the property, so get the lender's Good Faith Estimate from the buyer to reference to have more exact numbers.
  22. Lender Fees as Percentages of Loan (6A) is something you ask the lender since it varies by the company. A good ballpark is 2%. For this example, we are assuming the buyer is getting 95% loan to value conventional loan on a sales price of $250,000. The loan amount would be $237,500. (95% of the sales price or 0.95*250,000). This loan amount goes on the top of the right hand column after it says "based on $BLANK". The lender fee is .02*237,500= 4750.
  23. Appraisal and Credit Report (6B) is usually paid up front outside of closing. Some VA loans do have you pay at closing for these.
  24. Mortgage Insurance Lender Escrow (6C) should be from the lender for it since it varies. $180 is good estimate, but again that's rough.
  25. Mortgage Insurance Premium (6D) is paid up front on an FHA loan. For conventional, usually around $1200 is fine.
  26. VA funding Fee (6E) is for VA loans only. 
  27. Preparation Mortgage Documents (6F) is usually around $250, but varies.
  28. Interest from settlement date until end of month (6G) is asking for dollars per day. Take the buyer's interest rate from their Good Faith Estimate (or if it's just an example check out current market rates) and multiply that by the LOAN amount (NOT THE SALES PRICE). In the example, it's 3.8% * 237,000 = 9,025. That's the amount of interest for the first year. Divide by 12, then by 30 to get the daily rate. This example is $25.07 per day. To get the amount of interest per settlement until the end of the month, you take the amount of days times the amount of days left in month. For the example, you're closing June 1, so it's 30 days for the end of the month. 25.07*30=752.08.
  29. Miscellaneous Fees (6H) is anything else. 
  30. Home Warranty (7) is usually offered by the seller, but not always. If the buyer wants one and the seller is not paying for it, you can add the cost on here.
  31. Other (8) is another place to put a cost.
  32. Subtotal these costs for later. Just add them all up. This example is $21,723.
  33. Moving to the right hand column, we've already filled in our loan amount. $237,500 and you know the interest rate is 3.8% from the Good Faith Estimate.
  34. Principal and interest is the total amount per month. You can use Mortgagecalculator.org to estimate. Put the escrow numbers to zero in the calculator to get $1107 for this one.
  35. Taxes are supposed to be the monthly tax payments. This is in section 4, but be sure to take the monthly rate. $472 per month.
  36. Mortgage insurance premium should be half the amount in 6C to get the amount per month since the escrow is 2 months worth. This is $90
  37. Property insurance at the monthly rate from earlier. $1200 per year is $100 per month.
  38. Any condo association fees. Example has $0.
  39. Then add them up to get the monthly payment. 1107+472+100+90+0 = 1769. 
  40. If they are not getting a second mortgage, you can skip that section.
  41. From there, you can fill out the purchase price again. $250,000
  42. The costs subotaled from the first column ($21,723) gets put below that.
  43. ADD THEM TOGETHER to get the total costs of $271,723.
  44. On the "Less Mortgage amount" you are putting what the loan is. $237,500
  45. "Less Seller's Assist" is in the sales contract and is the seller paying some of the closings costs. The example assumes no sellers assist ($0)
  46. "Less Deposits" is the hand money or escrow money that the buyer has already turned in. This is in the sales contract on page 2. This example has $1000 for the amount. 
  47. For the next line, you subtract the mortgage amount from the total costs. 271,723 - 237,500 - 0 - 1000= 33,223.
  48. Sign the agent spot on the bottom, then save, then share with your client.