Closing Costs

Closing costs in real estate transactions encompass a variety of fees and expenses incurred during the real estate transaction. These fees are usually charged by third parties who have unique roles to play within the transaction, like home inspectors and appraisers, title companies and lenders.

Real estate agent commissions are somewhat different from traditional closing costs in that they’re taken out of the seller’s sale proceeds rather than being paid by the buyer.

Understanding Real Estate Agent Commissions

Real estate agent commissions are typically a percentage of the sale price of the home. They are agreed upon by the seller and their listing agent at the time of signing the listing agreement. The total commission is usually divided evenly between the seller's and buyer's agents. Although it’s normally a 50/50 split, there can be situations in which the agents negotiate a different division. Common reasons agent commissions may vary include:

• If the same agent represents both the buyer and seller (dual agency), the agent may negotiate a reduced commission with the home seller
• The sale of luxury or high-value properties may warrant a different commission split based on the unique buyer pool and marketing efforts of the seller agent
• If one agent refers a lot of business or repeat clients to another, the agent who benefits may give the other agent a larger share of the commission out of appreciation and to build or maintain the mutually beneficial relationship
• Situations in which a buyer’s agent helps sell a home that is in an undesirable location, needs a lot of repairs or has unique problems
• Scenarios in which one agent facilitated or was primary responsible for the sale due to their specialized skills or network
• New agents who want to establish themselves may be willing to take a lower split to build their portfolio quicker

Types of Closing Costs

Title Fees: These fees include title search costs and title insurance. These services are performed by title companies to protect homebuyers against future disputes.

Loan-Related Fees: Buyers obtaining a mortgage will need to pay loan origination fees, credit report fees, appraisal fees and possibly points paid to lower the interest rate.

Escrow Fees: Escrow fees are paid to the escrow company for overseeing the closing process, ensuring all conditions are met before the property and funds change hands.

Recording Fees: Recording fees are charged by the city or county for recording the new deed and mortgage documents in the public record.

Transfer Taxes: Some localities charge a tax for transferring the title of the property from the seller to the buyer.

Home Inspection and Survey Fees: Home inspectors assess the condition of the home, while a survey may be needed for some properties to ascertain its legal boundaries. A home inspection is separate from a home appraisal, which is required by the lender to ensure the loan amount is appropriate for the property value. The appraisal also must be paid for by the buyer.

Attorney Fees: In some cases, especially in certain states, attorneys are involved in the closing process, incurring legal fees. Even in states where attorneys aren’t required for real estate transactions, buyers and sellers may require contract review on unique, complex or high-value real estate transactions.

Homeowners’ Association (HOA) Fees: If the property is in a community with an HOA, there might be fees for transferring membership or dues that need to be paid upfront.

Property Taxes and Insurance: Prorated property taxes and homeowners insurance may be included in closing costs.

Miscellaneous Fees: Some real estate transactions may include a variety of ancillary expenses, including notary fees, courier fees for transporting documents and any other small charges that accumulate during the closing process. Many of these are typically paid for by the buyer.

Are Closing Costs Just Paid by the Buyer?

For the most part, yes, the fees associated with loans, title insurance, appraisals, inspections and escrow are the buyer’s responsibilities. This is in large part because they’re primarily for the buyer’s benefit.

Appraisal and Inspections: The buyer has an interest in ensuring they don’t buy a house with a lot of issues, and the lender has an interest in not lending funds in excess of the property’s value. These aren’t concerns for the seller.

Mortgage Fees: The only interest a home seller has in the buyer’s loan is ensuring they get paid in full at the end of the transaction. Since the buyer is the one borrowing money, they are expected to cover all the costs associated with their loan.

Title Fees: Similar to appraisals and inspections, the buyer is the party with the interest in guaranteeing a title is clear.

Seller Closing Costs

There are a handful of fees that may be paid by the seller, like title transfer fees. The real estate agent commissions also come out of the proceeds of the sale, which means it’s the home seller who pays those costs.

There are some scenarios in which closing costs can be a point of negotiation between the buyer and seller. Depending on the market conditions and the specifics of the transaction, sellers might agree to pay a portion of the buyer’s closing costs to incentivize the sale, or buyers might take on some of the seller's costs for a more favorable purchase price.

Maximize the Proceeds of Your Home Sale with 72SOLD

Closing costs typically aren’t a concern for clients of 72SOLD thanks to our highly effective home-selling process. Our approach revolves around establishing a sense of urgency and competition among qualified local buyers, meaning our clients don’t have to make a lot of concessions for the sake of getting their home sold.

We believe the seller’s agent should be the one marketing and selling the home rather than letting the buyer’s agent drive the process. Find out how 72SOLD gets homes sold fast and for a great price.