Closing costs are often a mystery to first-time buyers and even some sellers. These fees can add up to thousands of dollars and influence how much you bring to the table—or walk away with. Let’s break them down.
What Are Closing Costs?
Closing costs are the fees associated with finalizing a real estate transaction. These may include lender charges, title fees, government taxes, and more.
Typical Buyer Closing Costs Include:
- Loan origination fees
- Appraisal and inspection fees
- Title insurance and settlement fees
- Escrow deposits for property taxes and insurance
- Recording fees and transfer taxes
- Attorney fees (in some states)
Typical Seller Closing Costs Include:
- Real estate commission (typically 5-6%)
- Title transfer fees
- Repairs or concessions
- Outstanding liens or property taxes
How Much Are Closing Costs?
On average:
- Buyers can expect to pay 2%–5% of the home’s purchase price.
- Sellers often pay 6%–10%, mainly due to agent commissions.
Can You Negotiate Closing Costs?
Yes.
- Buyers can ask the seller to contribute to closing costs.
- Lenders might offer no-closing-cost mortgages, but rates are often higher.
How to Prepare for Closing Day
- Review the Closing Disclosure at least 3 days in advance.
- Bring ID, cashier’s check (or wire confirmation), and any required documents.
- Ask your agent or attorney to explain anything unclear.
Conclusion
Understanding closing costs reduces surprises and helps you budget more accurately. Whether you’re buying or selling, knowing these expenses empowers you to negotiate and plan more effectively.