Written by James Chae — Co-Founder, Expert Sapiens
Reviewed March 2026
Real Estate
Definition
The fees and expenses paid at the finalization of a real estate transaction, typically totaling 2–5% of the loan amount for buyers and 6–10% of the sale price for sellers.
Closing costs are the collection of fees, taxes, and prepaid expenses that must be paid when a real estate transaction is finalized. They are separate from the down payment and represent the administrative, legal, and financial costs of transferring property ownership. For buyers, closing costs typically run 2% to 5% of the loan amount; for sellers, total transaction costs including agent commissions can reach 6% to 10% of the sale price.
Buyer closing costs generally include loan origination fees, discount points, appraisal fees, credit report fees, title search and title insurance, escrow or attorney fees, prepaid homeowners insurance, prepaid property taxes, and prepaid mortgage interest. Government recording fees and transfer taxes also apply in most jurisdictions. Lenders are required by law to provide a Loan Estimate within three business days of a mortgage application, giving buyers a detailed early projection of these costs.
Seller closing costs are dominated by real estate agent commissions, which traditionally total 5% to 6% of the sale price (though this is evolving following 2024 NAR settlement changes). Sellers also pay their share of escrow fees, any prorated property taxes or HOA dues, transfer taxes in some states, and any agreed-upon repair credits or concessions to the buyer.
Closing costs can sometimes be negotiated or structured into the transaction. Buyers can ask sellers for a closing cost credit — a reduction in purchase price or an out-of-pocket contribution — particularly in buyer-favorable markets. Some lenders offer no-closing-cost mortgages that roll fees into the interest rate instead. Understanding the trade-offs of each approach requires careful calculation.
Closing costs are one of the most common sources of sticker shock for first-time buyers and sellers. Many people budget for the down payment and agent commissions but overlook the thousands in additional fees due at closing — or they misunderstand which costs are negotiable and which are fixed. Arriving at closing underprepared can delay or derail the transaction entirely.
A real estate professional will give you a realistic estimate of closing costs early in the process and can structure the offer to address them strategically. A real estate attorney in attorney-closing states will review the final closing disclosure to ensure every fee is accurate and justified. This professional review step can catch errors and overcharges that buyers and sellers would never spot on their own.
Written by James Chae — Co-Founder, Expert Sapiens
Reviewed March 2026