Over 60 percent of millennials are unaware of closing costs, according to a new survey. A ClosingCorp survey of more than 1,000 adults found that about 2 in 3 adults age 18-34, who plan to buy a home know nothing about closing costs. The survey also found that across all age groups, more than one-third of potential homeowners are “not very” or “not at all” aware of closing costs.
"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," said Brian Benson, CEO of ClosingCorp. "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.”
It seems more housing wisdom comes with age. Respondents were more likely to know about closing costs, the older they were. So for millennials their age might be working against them, by preventing them from having more experience and homebuying knowledge.
”This study emphasizes the need to better educate millennials, and really all consumers in general, on the real estate closing process. While interest rates are often the driving force in initiating a real estate transaction, the realtor, lender, title, and other settlement fees also have a significant impact on the down payment and cash outflow from the borrower perspective. Not understanding how everything is related can be a real impediment for first-time homebuyers who want to get into the market."
Closing costs are paid when a real estate transaction closes and the title to the property is transferred to the buyer. They typically equal 2 to 5 percent of the total purchase price of a home. The fees are incurred by either the buyer or the seller, and typically cover everything from appraisal, inspection and attorney's fees to home warranties. The survey showed that most people learn about closing costs from realtors, or by doing their own research. Millennials are even more likely to learn about closing cost from a realtor over other age groups by a ratio of nearly 2-1.
"This study is very interesting in that it 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. Whether they are researching a home on their own or getting help from an interested third party, the bottom line is that people need access to the correct information, and it needs to be simple for them to understand,” Benson said. “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."