Often in a California real property purchase and sale agreement, the buyer and seller decide how to divide closing costs by resorting to “custom.” In other words, they state, in the contract, that one or more categories of closing costs – such as City and County transfer taxes, escrow charges, and the cost of title insurance – will be paid according the customary practice of the County in which the real property is located. Title companies can provide this information; North American Title Company recently published a County-by-County breakdown for Northern California, titled “Customary Closing Costs In Northern California”.
These costs – particularly transfer taxes – can be substantial, and one is well advised to understand the custom of the County at issue before agreeing to such a provision. Or better yet, to avoid any question, simply specify the responsible party.
Scott M. Toussaint, Real Estate Group