Potential homebuyers mostly unaware of closing costs but survey reveals Realtors are a "go-to" source for info
Consumers - and particularly millennials and first-time homebuyers - tend to be unaware of closing costs. That knowledge gap means they may need to adjust their assumptions about how much house they can afford, according to findings in a new survey.
It even means deals could unravel, the survey sponsors suggested.
By a wide margin, the "ClosingCorp National Closing Costs Survey" showed most people learn about closing costs from Realtors, or by doing their own research. Researchers who analyzed the results reported millennial homebuyers (those in the 18-to-34-year-old age bracket) turn to Realtors for information on closing costs rather than lenders. In fact, they do so by a two-to-one margin.
ClosingCorp CEO Brian Benson expressed surprise at that finding, saying the study shows millennials are more dependent on Realtors than previously presumed. "We know they are more tech-savvy than their predecessors, so we believe this really highlights the complexity of a residential real estate transaction."
The ClosingCorp survey targeted 1,007 adults nationwide. Researchers reported about two-thirds of millennials who plan to buy are home were unaware of closing costs. They survey also revealed that across all adult age brackets, more than one-third of potential homeowners are "not very" or "not at all" aware of closing costs.
People need access to correct information, and it needs to be simple to understand, Benson emphasized, adding, "With the upcoming changes to the disclosure process being made by the Consumer Financial Protection Bureau this August, we as an industry should be stepping up our proactive education efforts to ensure homebuyers are fully prepared to make the most significant financial transaction of their lives."
In a statement about its survey, ClosingCorp noted the addition of costs for title insurance, lender origination fees, commissions and other settlement costs could mean a median-priced $202,600 home could end up costing more than $220,000 at closing.
"Not understanding how everything is related can be a real impediment for first-time homebuyers who want to get into the market," Benson stated.
"Much has been written about millennials because they are the largest generation so far in U.S. history, and their longstanding impact on the real estate market and economy is going to be huge," the ClosingCorp CEO remarked. "Their buying behaviors are much different than previous generations, and of particular concern to the industry is that they are waiting longer to buy their first homes. This study emphasizes the need to better educate millennials, and really all consumers in general, on the real estate closing process."
ClosingCorp® owns and operates a leading source of intelligence for closing costs and service providers in the U.S. residential real estate industry. Last year the company introduced a tool called Seller Net Sheet which is designed to help real estate agents give sellers an estimate of how much they can expect to net at closing.