Both buyers and sellers pay closing costs in a real estate transaction, but the specific costs each party covers can vary and are often negotiable.
Buyer Closing Costs
Buyers typically pay for:
- Loan origination fees (administrative costs for the mortgage)
- Appraisal fees (to confirm property value)
- Inspection fees
- Title insurance (to protect against title defects)
- Homeowner’s insurance premiums
- Escrow reserves for taxes and insurance
- Miscellaneous fees such as credit reports and document notarization
Buyers generally have more items to pay for in closing costs since these often relate to securing and insuring the loan and property
Seller Closing Costs
Sellers usually pay for:
- Real estate agent commissions (often 3% to 6% of sale price)
- Transfer taxes and escrow fees
- Owner’s title insurance (protects buyer from title defects)
- Payoff of any existing mortgage
- Prorated property taxes
- Any repairs or home warranties offered
- Attorney or closing agent fees
Seller costs tend to be fewer but can be substantial due to agent commissions and mortgage payoff if applicable
Negotiability
Who pays what can be negotiated between buyer and seller. Sellers may offer concessions to help buyers cover some closing costs to make the deal more attractive. The exact distribution of closing costs also depends on local customs and state laws
. In summary, both parties share closing costs, with buyers typically paying loan-related fees and sellers covering agent commissions and transfer-related fees. The total closing costs usually range from about 2% to 6% of the home’s sale price, split between buyer and seller
