Understanding Closing Costs in Real Estate: Albuquerque Market Insights

From Episode 556 of Albuquerque Real Estate Talk

By Venturi Realty Group

"Closing costs" is one of the most common, and most confusing, topics in a real estate transaction. For both buyers and sellers, these fees can feel mysterious, often raising critical questions: What are they for? Who is responsible for paying them? And most importantly, how much is it all going to cost?

A clear understanding of closing costs is essential for a smooth and predictable home buying or selling experience. In this detailed breakdown, Tego and Tracy Venturi (with questions from Asel Venturi, who has a background in home loans) dive deep into the world of closing costs to give you the clarity and confidence you need for your next transaction in the Albuquerque real estate market.

Who Pays the Closing Costs: Buyer, Seller, or Both?

The short answer is: both. In a typical Albuquerque real estate transaction, the seller has their set of closing costs and the buyer has theirs. However, the most important thing to know is that this isn't a universal rule; it's highly dependent on local customs.

"This is very specific to our location, right? In Santa Fe it's different. In Kentucky, it's different. In Texas it's different. In Las Cruces it's different."

- Tracy Venturi

Beyond local customs, who pays for what can also be a point of negotiation. Depending on whether it's a buyer's or seller's market, one party might ask the other to cover a specific fee to make the deal work. For example, a buyer who has their down payment ready but is short on cash for other fees might ask a seller to cover some of their closing costs as part of the offer.

What's Included in Closing Costs?

The total amount for closing costs "depends" because it's specific to each person's situation. The biggest factor is whether a mortgage is involved. A cash buyer, for example, will have very few closing costs because they don't have any loan-related fees.

Typical Buyer Closing Costs

For a buyer getting a mortgage, the majority of their closing costs are associated with originating the loan. These fees are the buyer's responsibility.

"Anything associated with the loan or getting the mortgage is gonna be a buyer closing cost."

- Tego Venturi

This can include:

• Mortgage Application Fee
• Loan Origination Fee
• Underwriting & Processing Fees
• Credit Report Fee
• Mortage Rate Buydown
• Appraisal Report

Other Fees and Costs Home Buyers Have:

• Property Inspections Costs
• Homeowners Insurance
• Property Tax Escrow Funding

Typical Seller Closing Costs

In the Albuquerque market, a seller's closing costs typically include:

• The Owner's Title Policy: This is a major one. It's an insurance policy that the seller purchases for the buyer to guarantee they are receiving a "clear title." As Tracy explains, "The title company is checking the history of the property and making sure they're conveying clear title, that there aren't any liens or judgements on the property."
• Title Company Fees: Most of the title company's fees for managing the closing. This is also called Escrow fees sometimes.
• Real Estate Commissions: The fee paid to the real estate professionals who facilitated the sale.

A Note on Real Estate Commissions

Real estate commissions are always negotiable. Typically, a seller agrees to a fee with their listing agent, and a buyer agrees to a fee with their buyer's broker. In our market, it is common for a buyer to write an offer that asks the seller to pay the buyer's brokers commission. As Tego notes, recent rule changes have brought more transparency to this negotiation.

When Are Closing Costs Paid?

This is different for buyers and sellers.

For Sellers: Most seller costs are paid at the very end, at closing. They are simply deducted from the proceeds of the sale at closing. The only exceptions might be if a seller pays for a inspection (septic inspections are normaly paid by the seller) or for repairs done prior to closing.

For Buyers: Buyers have some up-front, out-of-pocket costs before the closing day. These typically include:

• Earnest Money: This is a good-faith deposit submitted with the offer, which goes toward your closing costs.
• Independent Consideration: A small, non-refundable payment from buyer to seller that makes the contract binding.
• Inspection Fees: Buyers almost always pay for their home inspections at the time of service.
• Appraisal Fee: This is often prepaid to the lender.

The rest of the buyer's costs, including the down payment, are paid at the final closing in one lump sum called your "Cash to Close."

How Can a Buyer Reduce Closing Costs?

If you're a buyer, you have two main strategies for reducing the amount of cash you need to bring to closing.

1. Ask the Seller for a Contribution

You can ask the seller to contribute a certain amount toward your closing costs. However, this must be part of the negotiation from the very beginning.

"That's a part of the initial offer. That's not like we're down the road, we're under contract, and now I'm gonna ask the seller to cover these costs. That's a part of the whole offer process right up front."

- Tracy Venturi

For example, you might offer a specific price and ask the seller to "contribute $5,000 toward buyer's closing costs and prepaids." The seller then evaluates your offer as a whole. This is a very common strategy, especially for buyers using FHA or VA loans.

2. Use Down Payment Assistance Programs

New Mexico has excellent programs to help with down payments and closing costs. The best-known is Housing New Mexico (formerly known as the Mortgage Finance Authority or MFA). These programs have specific income and credit score qualifications, but they are a fantastic option for many buyers looking to reduce their upfront expenses.

When Will I See My Final Closing Cost Numbers?

You won't be in the dark, but the final, exact number isn't available until the very end. Here's the timeline:

• For Buyers (Up-front): When you first apply for a loan, your lender must provide you with a "Loan Estimate" (LE). As Tego mentions, "You have to get a disclosure on what the closing costs could be. It's an estimate."
• For Sellers (Up-front): At Venturi Realty Group, when we list your home, we provide you with a "Seller Net Sheet." This is a detailed estimate of all your costs so you can see your net proceeds from day one.
• The Final Number: The final, 100% accurate "Cash to Close" number for the buyer and the final "net proceeds" for the seller usually arrive the day before signing the closing documents.

---

FAQ: Closing Costs in Albuquerque Real Estate

What are closing costs?

Closing costs are the fees and expenses typically paid at the end of a real estate transaction. They cover services like lender fees, broker fees, title insurance, appraisals, recording, and escrow needed to transfer ownership.

Who pays closing costs — the buyer or the seller?

In most Albuquerque transactions, both buyers and sellers pay closing costs. Buyers typically cover loan-related fees, while sellers cover title and commission costs. The split can be negotiated in the offer.

How much are typical closing costs for buyers in Albuquerque?

For financed purchases, buyer closing costs usually range from 2% to 4% of the purchase price. Cash buyers often pay less because there are no lender fees.

Can a buyer ask the seller to pay some closing costs?

Yes. Buyers can request a seller contribution toward closing costs in the initial offer (for example, a flat dollar amount or percentage). The amount is limited depending on the type of loan.

What’s included in buyer closing costs?

• Loan origination and underwriting fees
• Appraisal and credit report fees
• Home inspection fees
• Homeowners insurance and escrow setup
• Buyer's broker fee

What’s included in seller closing costs?

• Owner’s title insurance policy for the buyer
• Title company or escrow fees
• Real estate commissions paid from sale proceeds

What is independent consideration in a real estate contract?

Independent consideration is a small, non-refundable payment from the buyer to the seller, separate from earnest money. It may be required to make the purchase agreement legally binding, especially when the buyer has a due-diligence period.

When are closing costs paid?

Buyers pay some items upfront (like inspections and appraisals) and the rest at closing as their “Cash to Close.” Seller costs are usually deducted from sale proceeds at closing.

How can buyers reduce closing costs?

Buyers can reduce costs by negotiating seller credits, comparing lender fees, and using down payment or closing cost assistance programs such as Housing New Mexico (formerly MFA).

When will I know my final closing cost numbers?

Buyers receive a Loan Estimate after applying and a final Closing Disclosure about three days before closing. Sellers receive a Seller Net Sheet early and a final settlement statement before signing.

Are real estate commissions part of closing costs?

Yes. In most Albuquerque transactions, commissions are part of the seller’s closing costs and are fully negotiable.

---

Get the Right Advice

Navigating closing costs, negotiations, and loan programs requires what we call "the trifecta": a great buyer (or seller), a great real estate agent, and a great mortgage broker all working together. Our team is here to help you put together the numbers, work with fantastic local lenders, and guide you into the best program for your needs. If you're thinking about buying or selling, we'd be happy to sit down, go through it all, and help you make the best decision for your situation.

Thinking of Buying or Selling?

We're here to help you navigate the process, from closing costs to closing day. Call us for a no-obligation consultation.

Venturi Realty Group

☎ Phone: (505) 448-8888 ✉ Email: info@welcomehomeabq.com 📍 Address: 1119 Alameda Blvd NW, Albuquerque, NM 87114 Send Us a Message