Closing Costs in Indiana vs Michigan
A side-by-side look at buyer and seller closing costs for South Bend, Mishawaka, and surrounding area home sales, from transfer taxes to title insurance to property tax prorations.
How closing costs work in both states
Closing costs are the fees and prorations due when a home sale finalizes. They are paid by the buyer, the seller, or both. Indiana and Michigan handle some of these costs differently, so it pays to know what to expect before you make or accept an offer.
Buyers: what to expect
Buyer closing costs usually range from 2% to 5% of the loan amount, depending on the loan type, lender fees, and whether you pay points to lower your interest rate. Common buyer costs include:
- Loan origination and underwriting fees - charged by your lender
- Appraisal fee - typically $400–$700
- Credit report and verification fees
- Title search and title insurance - protects against ownership disputes; rates vary by title company
- Home inspection - usually $300–$600
- Survey - may be required by the lender
- Prepaid items - homeowner's insurance, property taxes, and interest
- Recording fees - to record the deed and mortgage
Sellers: what to expect
Seller closing costs are usually higher because they include commissions, transfer taxes, and title-related fees. Typical seller costs include:
- Real estate commissions - negotiable; typically split between listing and buyer's brokerages
- Transfer taxes - state and sometimes local taxes on the sale
- Title insurance and closing fee - often paid by the seller in northern Indiana; negotiated in Michigan
- Prorated property taxes - credit to the buyer for taxes already paid or owed
- Recording fees for mortgage release
- Negotiated repairs or credits
Indiana specifics
- Property tax cap: Owner-occupied homes are capped at 1% of assessed value, with homestead and other deductions available.
- Transfer tax: Indiana does not impose a state real estate transfer tax, but some counties or localities may charge a small recording fee.
- Title fees: Title insurance and closing fees are commonly negotiated, with sellers often paying the owner's title policy in many South Bend and Mishawaka area transactions.
- Tax prorations: Indiana collects property taxes in arrears, so prorations are usually calculated at closing based on the current assessed value and tax rates.
Michigan specifics
- State transfer tax: Michigan charges a state real estate transfer tax, currently calculated at a set rate per $500 of sale price. Some municipalities add a local transfer tax.
- Property tax system: Michigan uses millage rates set by local governments and school districts. Effective rates in Berrien and Cass counties often range higher than Indiana's 1% cap.
- Proposal A: Limits how much your taxable value can increase each year while you own the home, which provides some predictability.
- No vehicle personal property tax: Unlike Indiana, Michigan does not charge annual excise tax on vehicles.
- Title and closing fees: Allocation between buyer and seller is negotiable; practices vary by county and transaction.
What is a seller's net sheet?
A seller's net sheet estimates how much money you will walk away with after paying off the mortgage, commissions, transfer taxes, title fees, prorations, and other closing costs. I prepare this for every seller before we list so there are no surprises on closing day.
Can closing costs be negotiated?
Yes. Buyers can ask sellers to pay some or all of their closing costs. Sellers can counter. Who pays title insurance, transfer taxes, and other fees is often a local custom but is always negotiable. A clear purchase agreement is what matters.
Frequently asked questions about Indiana and Michigan closing costs
Who pays closing costs in Indiana, the buyer or seller?
Both parties pay closing costs, but the types differ. Buyers pay loan-related fees, inspections, and prepaid items. Sellers pay commissions, transfer taxes, title fees, and prorations. Specific allocations are negotiable.
Who pays Michigan transfer tax, buyer or seller?
Michigan state transfer tax is typically paid by the seller unless otherwise negotiated. Some Michigan cities also charge a local transfer tax, which may be paid by the buyer or seller depending on local custom and the purchase agreement.
Does Indiana have a real estate transfer tax?
Indiana does not have a statewide real estate transfer tax. Counties may charge small recording fees when the deed is filed, but these are much lower than transfer taxes in many other states.
How are property taxes prorated at closing?
Property taxes are split between buyer and seller based on who owned the property during the tax period. In Indiana, taxes are paid in arrears, so sellers often credit buyers for taxes that will come due after closing. In Michigan, practices vary by county and closing date.
What is title insurance and who pays for it?
Title insurance protects against defects in ownership, liens, or other title issues. In many northern Indiana transactions, the seller pays for the owner's title policy. In Michigan, allocation is negotiable. Lenders require a separate lender's title policy, usually paid by the buyer.
Are closing costs higher in Indiana or Michigan?
It depends on the price, location, and loan type. Michigan's state transfer tax adds a seller cost that Indiana does not have. However, Indiana's property tax cap can mean lower ongoing tax bills. The best way to compare is to request a closing cost estimate for a specific property.
Explore South Bend area guides
Browse area guides for home buyers and sellers across Northern Indiana and Southwest Michigan:
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Need a closing cost estimate?
Call or text Worm at 574-240-WORM for a buyer or seller estimate on either side of the Indiana-Michigan line.