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Closing Costs Demystified: A Breakdown of Fees for Buyers and Sellers

Real Estate Agent with Frank Rubi Real Estate LLC


Closing costs are an essential part of any real estate transaction, whether you're buying or selling a home. These fees cover various services and expenses incurred throughout the process, from loan origination to title transfer. Understanding the breakdown of closing costs can help buyers and sellers budget accordingly and avoid surprises at the closing table. In this blog post, we'll demystify closing costs and provide an overview of the most common fees for both buyers and sellers.

Buyer's Closing Costs:

Buyers typically pay the majority of closing costs in a real estate transaction. These fees can range from 2% to 5% of the home's purchase price, depending on the location, loan type, and specific circumstances. Some of the most common buyer's closing costs include:

Loan Origination Fees:

  1. This fee is charged by the lender for processing, underwriting, and funding your mortgage loan. It's usually expressed as a percentage of the loan amount, typically around 0.5% to 1%.

Appraisal Fees:

  1. An appraisal is required by most lenders to determine the fair market value of the property. Appraisal fees can range from $300 to $500, depending on the property's size and location.

Credit Report Fees:

  1. Lenders will pull your credit report to assess your creditworthiness and determine your interest rate. Credit report fees generally range between $25 and $50.

Home Inspection Fees:

  1. Although not technically a closing cost, home inspections are an essential step in the home buying process. Inspections help identify potential issues with the property, allowing buyers to negotiate repairs or price adjustments. Home inspection fees vary by location and property size, but typically cost between $300 and $500.

Title Search and Insurance Fees:

  1. Title search fees cover the cost of researching the property's ownership history to ensure there are no outstanding liens or issues. Title insurance protects both the buyer and lender from potential title disputes or defects. These fees can vary significantly based on the property's price and location but typically cost between $500 and $1,500.

Escrow Fees:

  1. Escrow fees cover the cost of a neutral third party holding and managing funds during the transaction. This ensures that all conditions are met before funds are disbursed to the appropriate parties. Escrow fees can vary by location and property price, but generally range from $500 to $1,000.

Seller's Closing Costs:

While sellers generally pay fewer closing costs than buyers, they still incur several fees. These can include:

Real Estate Agent Commissions:

  1. This is the most significant closing cost for sellers, typically ranging from 5% to 6% of the home's sale price. This fee is split between the seller's agent and the buyer's agent as compensation for their services in marketing, negotiating, and facilitating the transaction.

Title Transfer Fees:

  1. Sellers are responsible for transferring the property's title to the buyer, which involves filing the necessary paperwork and paying any associated fees. Title transfer fees can vary by location and property value but typically range from $100 to $500.

Prorated Property Taxes:

  1. Sellers may be responsible for paying a portion of the property taxes for the year, depending on the closing date. This amount is prorated based on the number of days the seller owned the property during the tax period.

Home Warranty:

  1. Some sellers choose to offer a home warranty to attract buyers and provide peace of mind. A home warranty covers the cost of repairing or replacing major home systems and appliances for a specified period after the sale. Home warranties typically cost between $300 and $600.

Miscellaneous Seller Concessions:

  1. In some cases, sellers may agree to cover specific buyer's closing costs or offer concessions to make their property more attractive. These can include covering a portion of the buyer's loan points or offering a credit for repairs identified during the home inspection. The cost of these concessions will vary depending on the specific agreement between the buyer and seller.


How to Prepare for Closing Costs:

To avoid surprises and ensure a smooth transaction, both buyers and sellers should prepare for closing costs ahead of time.

Request a Loan Estimate:

  1. Buyers should request a loan estimate from their lender shortly after applying for a mortgage. This document provides a detailed breakdown of estimated closing costs and can help buyers plan and budget accordingly.

Review the Closing Disclosure:

  1. Both buyers and sellers will receive a closing disclosure at least three days before closing. This document outlines the final closing costs and should be carefully reviewed to ensure accuracy and identify any discrepancies.

Negotiate Costs:

  1. In some cases, buyers may be able to negotiate certain closing costs with the seller, such as requesting the seller to cover a portion of the fees or offering a credit for necessary repairs. Additionally, buyers can shop around for certain services like title insurance and home inspections to find the best value.

Plan for Additional Expenses:

  1. Aside from closing costs, both buyers and sellers should be prepared for other expenses associated with the transaction. For buyers, this may include moving costs, immediate repairs, or new furniture. Sellers may need to invest in home staging, minor repairs, or improvements to make their property more appealing to potential buyers.

Understanding and preparing for closing costs is crucial for both buyers and sellers in a real estate transaction. By familiarizing yourself with the most common fees and taking steps to budget and negotiate where possible, you can ensure a successful transaction and avoid unexpected financial surprises. Remember to review loan estimates and closing disclosures carefully, and work closely with your real estate agent and lender to navigate the closing process confidently.  If you have any questions on closing costs or anything Real Estate, give me a call at 504-508-3149.

Sham Reddy CRS
Howard Hanna RE Services, Dayton, OH - Dayton, OH

Thanks for a great blog Joseph!!!

Understanding the breakdown of closing costs can help buyers and sellers budget accordingly and avoid surprises at the closing table. In this blog post, we'll demystify closing costs and provide an overview of the most common fees for both buyers and sellers.

May 03, 2023 03:36 AM
Joseph Lorenzo

Thanks Sham.  

May 03, 2023 05:50 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Very good information. Thanks for sharing and enjoy your week! Happy Hump Day! 

Bill Salvatore with Arizona Elite Properties 

May 03, 2023 05:51 AM
Joseph Lorenzo

Thanks Bill.  Happy Hump Day to you too!!

May 03, 2023 06:04 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Joseph,

What a great post defining the fees Sellers and Buyers will be responsible for in a home purchase.

May 03, 2023 05:54 AM
Joseph Lorenzo

Thanks Dorie


May 03, 2023 06:04 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

And these costs different from location to location. For example, here sellers pay the owners title insurance but buyers pay the bank insurance. This is a great overview for sellers and buyers in your area!

May 03, 2023 06:02 AM
Joseph Lorenzo

Thanks Kat.  

May 03, 2023 06:05 AM
Charles Ross - eXp Realty LLC
eXp Realty LLC Salina Group - Salina, KS
Love To Help People

Excellent information.Thank you for sharing. Have a wonderful day and a blessed week.

May 09, 2023 04:11 AM
Joseph Lorenzo
Frank Rubi Real Estate LLC - Harahan, LA
Your Law And Order Realtor

Thank you Charles.  

May 10, 2023 08:26 AM
Frank Rubi
Frank Rubi Real Estate, LLC - Metairie, LA

Helpful information for all parties as the fees that pertain to the closing. 

May 11, 2023 12:35 PM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

I think this is a helpful post to share with buyers and sellers alike!  Good job. 

May 28, 2023 05:00 AM