Closing costs in Michigan

You’ve found your dream home in Michigan, and now you’re ready to seal the deal and claim the keys. Or maybe you’ve found your dream home in another state and are ready to sell your current place in the Great Lakes State. While you might be focused on mortgage payments and asking prices, both buyers and sellers should also consider how much they’ll owe when they sit down at the closing table.

Closing costs here, as in any state, can add up to thousands of dollars and are dependent on a lot of varying factors. Here’s a closer look at closing costs in Michigan.

How much are closing costs in Michigan?

According to data from CoreLogic’s ClosingCorp, closing costs in Michigan add up to an average of 2.7 percent of the home’s sale price. That’s high, relative to many other states in the Midwest: The rate in Ohio is 2.0 percent, it’s 1.5 percent in Wisconsin, and in Indiana, it’s only 0.9 percent.

July 2023 data from Redfin shows that the median sale price in the state was $259,500. So, based on those two figures, closing costs on a median-priced Michigan home would equal just over $7,000.

Of course, your closing bill will vary based on how expensive the home is, and prices can vary significantly by location. In Ann Arbor, where the median home price is $465,000, closing costs would add up to $12,555, whereas in Kalamazoo, where the median is just $191,000, that figure would be a much lower $5,157.

Who pays closing costs in Michigan, buyers or sellers?

Both homebuyers and sellers will owe at least some closing costs in any state, including Michigan. Typically, buyers pay for a longer roster of expenses, largely related to taking out a mortgage. But selling a house isn’t all profit — in fact, sellers typically spend more on closing costs overall, since they are responsible for shouldering the real estate agents’ commissions. And if real estate attorneys are involved, both parties will be responsible for paying their own legal fees.

Closing costs for buyers

As a buyer, most of your closing costs will be associated with your home loan. (If you are buying with cash, your closing costs will be much lower.) Borrowers typically cover fees and expenses related to both the lender and the property, including:

• Loan application and origination: Most lenders charge fees to process your loan application and originate the loan.
• Credit report: Lenders may also charge a small fee to run a check on your credit.
• Mortgage points: If you choose to purchase mortgage points, which can lower your interest rate and save you thousands in the long run, that upfront cost will be due at closing.
• Home appraisal: Your lender will require a professional appraisal, to make sure the property is worth at least the amount they plan to lend you. The appraiser’s fee will be part of your closing costs.
• Home inspection: Unlike appraisals, home inspections are not required by the lender — but they are critical. This is your chance to make sure the home doesn’t have any major structural or safety issues, or minor ones that could snowball over time. If the inspector finds any issues, you may be able to negotiate to have the seller pay for repairs.
• Title insurance and search: A title search checks for liens or encumbrances that might hamper the ownership transfer of the home, while title insurance protects in the event of problems. The seller typically pays for the owner’s title policy in Michigan, but it may vary based on location.
• Property taxes and insurance premiums: Many lenders require you to prepay several months’ worth of property taxes and homeowners insurance premiums upfront. These funds will be placed in an escrow account and disbursed as needed on your behalf.

Closing costs for sellers

Sellers have closing costs, too, and they typically spend far more than buyers. That’s because sellers are on the hook for real estate agent commissions, which typically run from 5 to 6 percent of the home’s sale price. For a median-priced $259,500 Michigan home, a 5.5 percent agent commission would equal a hefty $14,272. Here are some of the other fees sellers can expect to pay at closing:

• Title-related fees: The seller typically pays for the owner’s title insurance policy in Michigan. That and other title-related fees may vary based on location, though.
• Transfer taxes: In Michigan, the seller is responsible for paying transfer taxes, which cover the transfer of property ownership. The statewide rate is $3.75 for every $500 in value — so, for a median-priced $259,500 sale, the transfer tax would come to $1,946.25.
• Property taxes and HOA fees: You’ll need to pay any outstanding property taxes and HOA fees, if applicable, upon closing.
• Seller concessions: If you have agreed to any concessions to your buyer, such as paying for a needed repair or covering any other cost, that amount will be deducted from the sale price at closing.
• Wire transfer fees: You may be charged small fees to cover the transfer of funds, for example if you need to pay off your existing mortgage.
  

Lowering your closing costs in Michigan

While you won’t have flexibility with government fees and taxes, many other closing costs are negotiable. Sellers can typically negotiate their Realtor commission, the largest expenditure. And buyers can talk to their lenders about the possibility of discounted rates or waived fees.

In addition, buyers — especially first-time homebuyers — should do some research to see if they qualify for financial programs that help cover closing costs and down payments. Michigan has many first-time buyer programs that can help make homebuying costs less onerous, and many local counties and cities have their own programs as well. Your real estate agent can help you figure out what programs are available in your area.

Find a local real estate agent

Whether you’re buying or selling a home in Michigan, it pays to work with an experienced real estate agent who’s familiar with your specific corner of the Great Lakes State. In downtown Detroit or the Upper Peninsula, Ann Arbor or East Lansing, a knowledgeable local agent can help sellers choose the right asking price and market their home efficiently, and help sellers find homes that meet their needs and budget. Bankrate can match you with an agent in your area.

FAQs

• Does the seller pay closing costs in Michigan?

  Yes, sellers pay closing costs in Michigan (and every state). Sellers are on the hook for a number of expenses, including real estate commissions, one of the heftiest costs associated with any real estate transaction.
  

• What is the most expensive part of closing costs?

  Real estate agents’ commissions are typically the priciest part of closing costs. These are paid by the seller and run between 5 and 6 percent of the home’s purchase price. For a median-priced $259,500 Michigan home, a 5.5 percent agent commission comes to $14,272.