What Are Real Estate Closing Costs?

Closing costs are the expenses that buyers and sellers incur to finalize a transaction. Costs average between 2% and 5% of the mortgage amount.

Things to Keep in Mind

Closing day is one of the most eagerly anticipated days in the real estate process for both buyers and sellers. However, it is also one of the most expensive due to the large number of charges deferred until closing, otherwise known as closing costs. Find out which closing costs you can expect to see on your side of the closing table and what they cover.

What are closing costs?

Real estate closing costs are the collection of fees, commissions, taxes, and other charges that are involved in the home sale or purchase process. They encompass payments to the various professionals involved in the transaction as well as charges that have to be paid upfront, like your initial homeowners insurance payment or HOA fees

In addition, there are fees associated with some of the legal aspects of the home sale or purchase, such as transferring and recording the deed, conducting a title search, and obtaining a credit report.

Who pays closing costs? Do sellers pay closing costs?

Both buyers and sellers pay real estate closing costs. In the event that a seller is receiving money from the equity in his or her home, closing costs will be taken out of those funds before disbursement. For buyers, closing costs will be paid along with the remainder of his or her down payment, with a credit given for previous payments like the Earnest Money Deposit (EMD) or in the event of seller help. 

Closing Costs: Buyers

Buyers' closing costs include some or all of the following:

  1. Lender’s title insurance
  2. Notary fees
  3. Wire transfer fees
  4. Recording
  5. State, county, or city transfer taxes
  6. Home Insurance
  7. Lender fees paid in conjunction with obtaining the mortgage
  8. Insurance premiums
  9. Property taxes
  10. Mortgage Insurance Premiums (MIP), if required
  11. Prepaid interest or points

Closing Costs: Sellers

Sellers' closing costs include some or all of the following:

  1. Agent commissions for both buyers and sellers (usually approximately 6% of the home’s purchase price)
  2. Transfer taxes
  3. Escrow fees
  4. Prorated property taxes for the portion of the year prior to closing
  5. Prorated Homeowners Association (HOA) fees
  6. Seller credits toward settlement as agreed to in the purchase contract
  7. Attorney’s fees
  8. Owner’s title insurance

What are the average closing costs in California?

Average closing costs for buyers in California are generally around 2-3% of the purchase price of the property. For sellers, a range of 5-9% is more common, in order to account for the broker commissions which are paid by the seller. To learn more about escrow fees and to see how Endpoint compares check out our pricing here.

Can I negotiate closing costs? Can I avoid paying closing costs?

Most of the room for negotiating closing costs is on the buyer side. This is because the bulk of the seller’s closing costs goes to paying the real estate agents or brokers involved in the transaction.

For buyers, most of the savings on closing costs will come in the form of negotiating a better deal on your mortgage, including lender fees and mortgage incentives and rebates. In addition, there may be valuable grants and discount programs that pay some or all of your closing costs, depending on various factors like profession, income, first-time homebuyer status, or incentive programs for specific neighborhoods or metropolitan areas.

Talk to both your real estate agent and your lender about special programs you may qualify for before you start your home search.

What are junk fees in closing costs?

Junk fees or garbage fees are tacked on to many lender fees and paid by unsuspecting buyers. Ask your lender about these and do not be afraid to negotiate them down or ask for them to be eliminated altogether. You may see junk fees charged under the following line items:

  1. Application fees
  2. Underwriting fees
  3. Rate lock fee
  4. Processing fee
  5. Broker rebate

How long after closing are funds disbursed?

Depending on your closing and settlement provider, funds may be disbursed to the seller on the day of the closing or up to two days later. While a traditional paper closing process often slows down disbursement, a secure process like the one pioneered by Endpoint, can significantly streamline and speed up the disbursement of seller funds.

Experience a faster, more seamless, and more reliable closing process with Endpoint. Endpoint’s end-to-end closing combines the power of advanced technology with the reliability and expertise of their parent company, First American.

Learn more about Endpoint and find out how you can enjoy a higher degree of satisfaction and peace of mind in your closing process.