Closing Costs

Closing costs are the fees and expenses paid to finalize a real estate transaction beyond the purchase price of the home itself. For buyers, these costs typically range from 2% to 5% of the purchase price and fall into three main categories. Loan and Lender Fees include the origination fee (typically 1% of the loan amount), appraisal fee to verify the property value, credit report fee, and underwriting fee. Title and Third-Party Fees cover the title search to verify there are no liens or claims against the property, both lender and owner title insurance policies, the settlement or escrow fee for coordinating the closing, and recording fees to register the deed with the county.

Prepaids and Escrow include daily interest from the closing date to the end of the month (prepaid interest), the initial year of homeowners insurance premium, and property tax escrow deposits (typically 2-3 months of taxes). The largest cost for sellers is real estate agent commissions, which traditionally totaled 5-6% of the sale price split between the listing agent and the buyer's agent. Following the 2024 National Association of Realtors settlement, these commissions are now fully negotiable, and buyers may need to negotiate and pay their own agent's compensation directly.

Sellers also typically pay transfer or excise taxes, which vary by location, and may contribute to the buyer's closing costs through seller concessions, a common practice in buyer's markets.