Understanding Closing Costs: What Buyers and Sellers Should Know

Buying or selling a home is exciting—but before the keys officially change hands, there’s one last step that everyone encounters: closing costs. These fees can sometimes feel confusing or unexpected, especially for first-timers. But with the right knowledge, you can walk into the closing table fully prepared.

Whether you’re a buyer, a seller, or both at different stages of your real estate journey, here’s a simple breakdown of what you need to know.

What Are Closing Costs?

Closing costs are the fees and expenses paid at the end of a real estate transaction, separate from the purchase price. They cover everything from loan processing to legal documentation. These costs vary depending on the home price, location, type of loan, and specific agreements between the buyer and seller.

In most cases, closing costs range from 2% to 5% of the purchase price—but who pays what is where things get interesting.

Closing Costs for Buyers

Buyers typically shoulder more of the closing costs. Common expenses include:

1. Loan Origination Fees

Charged by the lender for creating and processing the mortgage. Think of it as the administrative cost of securing financing.

2. Appraisal Fee

A professional assessment of the home’s value, required by lenders to ensure the property is worth the loan amount.

3. Credit Report Fee

The cost for lenders to pull your credit history.

4. Title Search and Title Insurance

Ensures the property doesn’t come with legal issues or ownership disputes. Title insurance protects both the lender and buyer from future claims.

5. Home Inspection

While optional, this is highly recommended to uncover potential issues before committing to the purchase.

6. Prepaid Taxes & Insurance

Buyers often prepay a portion of property taxes, homeowner’s insurance, and sometimes interest, depending on the closing date.

Closing Costs for Sellers

Sellers have their own set of fees, often deducted from their proceeds:

1. Real Estate Agent Commission

Typically the largest expense for sellers and usually split between the buyer’s and seller’s agents.

2. Transfer Taxes

Fees charged by the local government to transfer ownership of the property.

3. Title Fees

This may include providing title insurance to the buyer—depending on local customs—and ensuring the title is clear.

4. Prorated Property Taxes

Sellers are responsible for the portion of taxes owed up until the day of closing.

5. Potential Repairs or Concessions

If repairs were negotiated after inspection, or if the seller agreed to contribute toward the buyer’s closing costs, this will also be reflected.

Can Closing Costs Be Negotiated?

Yes—sometimes.

Buyers can request seller concessions, especially in a slower market. On the other hand, sellers may negotiate repairs or credits to keep the deal moving. Everything is negotiable as long as both parties agree.

Why Understanding Closing Costs Matters

Being prepared prevents surprises. Whether you’re budgeting for your first home or planning to sell at the best possible net gain, understanding closing costs helps you set realistic expectations, negotiate confidently, and make informed financial decisions.

Closing costs might seem like a small part of the transaction—but they impact your bottom line more than you think. By knowing what to expect and discussing options with a trusted real estate professional, you’ll be able to navigate the process with clarity and confidence.

If you’re thinking about buying or selling soon and want help estimating your closing costs, feel free to reach out—I’d be happy to guide you.