14 July 2025
When closing on a home, one of the most confusing (and often stressful) parts is figuring out who pays for what in closing costs. Buyers and sellers each have their own set of financial responsibilities, but how do you determine who covers what?
Closing costs can add thousands of dollars to a real estate transaction, and if you're not prepared, they can catch you off guard. But don’t worry—I’ll break it all down so you know exactly what to expect when closing day rolls around.
Let’s dive in!

What Are Closing Costs?
Closing costs are the various fees and expenses that buyers and sellers must pay at the end of a real estate transaction. These costs cover everything from loan origination fees and title insurance to property taxes and escrow fees.
The total amount varies depending on factors like location, the price of the property, and lender requirements. Typically, closing costs range between 2% and 5% of the home’s purchase price for buyers, while sellers usually pay a different set of fees.
Now, let’s break it down further.

What Closing Costs Does the Buyer Pay?
As a buyer, you're already dropping a big chunk of cash on the down payment. But on top of that, you'll also be responsible for several closing costs, including:
1. Loan-Related Fees
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Loan Origination Fee – Charged by the lender for processing your mortgage. It typically ranges from
0.5% to 1% of the loan amount.
-
Credit Report Fee – Covers the cost of pulling your credit report (usually around $30-$50).
-
Discount Points – Optional but can lower your interest rate if you choose to buy points upfront.
2. Appraisal and Inspection Fees
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Appraisal Fee – The lender requires an appraisal to determine the home's fair market value (normally
$300-$500).
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Home Inspection Fee – While not always required, a home inspection is a must to check for potential issues (average cost ranges
$300-$600).
3. Title and Escrow Fees
-
Title Search Fee – Ensures the property has no liens or legal claims (cost ranges
$200-$400).
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Title Insurance (Lender’s Policy) – Protects the lender if any title issues arise (
$500-$1,500, depending on location).
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Escrow Fees – Paid to the escrow company for managing the closing process and handling funds (varies, but roughly
$500-$2,000).
4. Prepaid Costs & Insurance
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Property Taxes – Buyers often need to prepay property taxes for the upcoming months.
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Homeowners Insurance – Most lenders require the first year's premium upfront.
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Mortgage Insurance – If your down payment is below 20%, you may have to pay Private Mortgage Insurance (PMI).
5. Recording and Government Fees
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Recording Fee – Charged by the local government to register your ownership of the property.
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Transfer Taxes – Some states require buyers to pay a portion of transfer taxes.
So, in summary, buyers end up paying for loan-related charges, inspections, taxes, and insurance. Now, let’s see what sellers are responsible for.

What Closing Costs Does the Seller Pay?
Selling a home doesn’t just mean counting your profits—you have plenty of costs to handle, too. Here’s a breakdown of what sellers usually cover:
1. Real Estate Agent Commission
- The biggest cost for sellers is typically the
real estate agent commission, which is
5%-6% of the home price.
- This fee is split between the buyer’s and seller’s agents.
2. Title and Escrow Fees
-
Owner’s Title Insurance – Unlike the buyer, the seller pays for the owner’s title insurance policy, which protects the new owner from title issues (
$500-$2,000, depending on the property value).
-
Escrow Fees – Some escrow fees are split between buyer and seller, while others may be covered entirely by the seller.
3. Transfer Taxes & Recording Fees
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Transfer Taxes – Many states require sellers to pay state or county transfer taxes on the sale of the home.
-
Recording Fees – In some cases, sellers need to cover recording fees for deed transfers.
4. Prorated Property Taxes & HOA Fees
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Property Taxes – If the seller already paid taxes for the year, they might receive a prorated refund at closing.
-
HOA Fees – If the property is in an HOA, the seller might need to cover outstanding dues or transfer fees.
5. Seller Concessions (If Agreed Upon)
- Some sellers
offer to cover a portion of the buyer’s closing costs as an incentive. This is common in slower markets where buyers have more negotiating power.
Sellers tend to pay a larger lump sum, but most of it comes out of their sale proceeds rather than upfront.

Can Closing Costs Be Negotiated?
Absolutely! Who pays what in closing costs isn’t set in stone—it’s all negotiable. Buyers and sellers can negotiate in their contract to shift costs around.
For example:
- In a hot seller’s market – Buyers may take on more of the closing costs to make their offers more competitive.
- In a buyer’s market – Sellers may agree to cover some of the buyer’s closing costs to attract more interest.
Who Actually Pays More in Closing Costs?
If you look at the percentage breakdown, buyers typically pay
2%-5% of the home price in closing costs, while sellers pay around
6%-10% (mostly due to agent commissions).
However, sellers don’t always feel the financial hit upfront—closing costs are deducted from the sale proceeds rather than coming out of pocket. Buyers, on the other hand, need to bring cash to the table at closing.
How to Reduce Closing Costs
Want to keep more money in your pocket? Here are a few ways to lower your closing costs:
For Buyers:
✔
Shop around for lenders – Compare rates and fees to find the best deal.
✔
Negotiate with the seller – Ask if they’re willing to cover some of your closing costs.
✔
Look for lender credits – Some lenders offer credits in exchange for a slightly higher interest rate.
For Sellers:
✔
Consider a flat-fee real estate agent – This can save thousands on commission fees.
✔
Negotiate with the buyer – Avoid unnecessary concessions if your home is in high demand.
✔
Shop around for title and escrow services – Different companies charge different rates.
Final Thoughts: Who Pays for What in Closing Costs?
At the end of the day, buyers and sellers
each have their share of closing costs, but there’s always room for negotiation. Sellers often cover agent commissions and transfer taxes, while buyers handle loan-related fees, inspections, and insurance.
If you’re buying or selling a home, be sure to go over closing cost estimates with your lender and real estate agent so you’re not blindsided at the closing table.
It’s all about planning ahead, negotiating smart, and knowing exactly where your money is going.
Happy buying (or selling)!