Pro Tip: Understanding Closing Costs when Selling Your Lot

The Purpose of Title and Escrow

Title and escrow are two separate but related services that protect both sides of a real estate transaction. Title confirms that the seller legally owns the property and that it’s free of liens or claims, then insures against any hidden issues that might surface later. Escrow is the neutral third party that holds
the funds and paperwork throughout the transaction, releasing them only once every condition of the sale has been met.

Escrow

Buyer and seller traditionally each pay their own escrow fee — this is the charge for the escrow company’s services in managing the transaction.

Title

Traditionally paid for by the seller. Title insurance protects property owners and lenders against financial loss from defects in the title to real property that existed before the policy was issued.Unlike most insurance, which protects against future events, title insurance primarily protects against past problems that are discovered after closing. Title insurance helps provide confidence that the buyer is receiving the ownership interest they expect and that the lender’s lien has the expected priority.

Common risks include:

• Undisclosed liens or judgments

• Forged or fraudulent documents

• Unknown heirs or ownership claims

• Certain easements, encumbrances, or other title defects

• Before issuing a policy, the title company researches the public records and works to identify and resolve title issues. Once issued, the policy provides protection against covered title defects, which may include paying legal defense costs and covered financial losses.

• The exact coverage depends on the specific policy form, exceptions, exclusions, and underwriting requirements.

HOA Demand Fee

Expect around $700, almost always paid by the seller unless negotiated otherwise during the offer process. This fee is charged by Desert Resort Management (DRM), which manages the HOA for ORI. The HOA demand covers the property’s financial history with the HOA and typically includes items such as any amounts owed, the CC&Rs, architectural rules, and the HOA’s current financial statement, though the full package will include additional documents as well.

The Escrow company needs the HOA demand aka statement of account and can’t close without it.  If the buyer chooses to waive HOA docs they will be required to sign a waiver that DRM requires.

Title needs these documents to clear the property for sale and issue a title insurance policy, and they’re also required to properly disclose the property and resort to the buyer.

Requesting these documents takes DRM about 10 days to deliver to the title and escrow company, so it’s worth building that timeline into your expectations. In a seller’s market, or when a buyer is offering an aggressive price, sellers can sometimes negotiate to have the buyer cover this fee — that’s a harder ask in a buyer’s market. DRM itself does not negotiate the fee.

HOA Transfer Fee

Expect around $300. This fee covers DRM’s work updating records from the previous owner to the new one, and it’s paid through the escrow process. As with the demand fee, DRM does not negotiate this charge.

Misc. Fees

A handful of smaller charges round out the closing costs: the city transfer fee, the Natural Hazard Disclosure report, and notary fees. Prorated property taxes and HOA dues are also settled at closing.

State and Federal Tax Considerations

Escrow will provide a form related to the tax implications of the sale. It’s worth talking with your CPA ahead of time about what to expect from both California and the federal government.

Non-U.S. Citizen Sellers

Talk to your CPA early. If you are NON-U.S. resident there will be 15% withheld and sent to the IRS through closing.  Sellers will need to apply for a US tax ID and talk to a CPA to see if they qualify to get any or some of this back.

The ALTA Settlement Statement

Both the buyer and seller receive their own ALTA settlement statement. This document itemizes exactly how the money is being disbursed — every cost and expense tied to the transaction. It’s prepared by the escrow company and typically arrives within a few days of closing, once title and escrow have completed their research.

Requesting an Estimated Net Sheet

An estimated net sheet isn’t sent automatically — it’s a service you request. Either the buyer or seller can ask for one to get a clearer picture of what closing will actually cost, including many of the smaller, easy-to-overlook fees. It won’t reflect prorated taxes or HOA dues, since those depend on the closing date. If you’re evaluating an offer and want to understand your likely closing costs before you accept, ask your agent to request an estimated net sheet.

Inspections

Buyers typically order and pay for their own inspections — general, electrical, plumbing, pest, or any city records they want pulled to learn more about the property before closing.

When a Loan Is Involved

Financed purchases come with additional contingencies, timelines, and moving parts. Loan-related costs — appraisals, inspections, surveys — usuallly belong to the buyer. The bigger issue with financed deals is usually timing rather than cost: the combination of inspections, appraisals, and back-and-forth with the lender can stretch out longer than expected, even with a pre-approved buyer. Banks, in our experience, aren’t especially concerned with contract due dates. Sellers should also be aware that if the appraisal comes in below the agreed purchase price, the loan may not be approved at all.

Property Surveys

Surveys aren’t a common part of transactions at ORI, but when they do come up, it’s usually because a buyer wants to confirm that improvements — pergolas, outdoor kitchens, and similar structures — sit within the property lines and not in an easement. Buyers typically pay for these.

When to Negotiate

In a typical transaction, each side pays their own closing costs. That said, depending on the market, and the offer price, fees can be negotiated — buyers can attempt to shift their costs to the seller, and sellers to the buyer. Any of these negotiations need to happen during the offer and counteroffer process, not after.

When to Bring in a Specialist

Over the years, this process has become divided among distinct areas of expertise, largely due to liability. That’s why we point clients to the right specialist rather than risk giving advice outside our lane: CPAs, title officers, escrow officers, appraisers, inspectors, electricians, real estate agents, and loan officers each play a specific role — and each is worth consulting directly when a question falls into their area.

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