Legal Definitions - nonrecurring closing costs

Nonrecurring closing costs refer to the one-time fees and expenses that a buyer or seller pays at the completion of a real estate transaction, known as "closing." Unlike recurring costs, such as annual property taxes or homeowner's insurance premiums, these charges are paid only once to finalize the purchase and transfer of property ownership.

These costs cover various services and administrative actions necessary to legally complete the sale, ensuring all documents are processed, funds are exchanged, and ownership is properly recorded. Examples often include fees for appraisals, title insurance, loan origination, escrow services, recording the deed, and transfer taxes.

• Example 1: First-Time Homebuyer

  Sarah and Tom are purchasing their first home. At the closing table, they pay a fee for the appraisal, which assessed the home's market value, and a premium for title insurance, which protects them against future claims to ownership. They also pay a small recording fee to officially register their new deed with the county clerk's office.

  These are all one-time charges directly related to finalizing the purchase and securing their ownership. They are not expenses Sarah and Tom will pay annually or monthly as part of owning the home.

• Example 2: Relocating Professional

  David is relocating for a new job and purchasing a condominium in a different state. As part of his closing costs, he pays a loan origination fee to his lender for processing his mortgage application and a transfer tax to the state for the change of property ownership. He also pays an escrow fee to the neutral third party who managed the closing process and held all funds and documents.

  These fees are specific to the transaction of buying the condo and are paid only once at the time of closing. They are distinct from his ongoing mortgage payments or future property taxes, which are recurring expenses.

• Example 3: Real Estate Investor

  Maria, an experienced investor, is adding a duplex to her portfolio. At closing, she incurs a fee for a property survey to confirm the exact boundaries of the land and a notary fee for authenticating her signature on various legal documents. She also pays a document preparation fee to the closing agent for drafting the necessary paperwork.

  Each of these costs is a single payment made to complete the acquisition of the duplex. They are not recurring expenses like property management fees or annual insurance premiums that she will pay throughout her ownership.