Last Updated: January 2026

Who pays closing costs is one of the most common questions home buyers and sellers ask when navigating a real estate transaction. The short answer: both parties pay closing costs, but the specific costs are divided based on local customs, purchase agreement terms, and negotiations between buyer and seller.

Closing costs typically range from 2% to 6% of the home's purchase price, representing thousands of dollars in fees for services like appraisals, title insurance, lender fees, and taxes. Understanding which closing costs you're responsible for, and which ones are negotiable, can save you significant money when buying or selling a home.

Quick Overview: Buyer vs. Seller Closing Costs

While closing cost responsibility varies by location and negotiation, here's a general breakdown of who typically pays what:

Closing Costs Buyers Typically Pay

Home buyers should expect to pay 2% to 5% of the purchase price in closing costs. For a $400,000 home, that's $8,000 to $20,000 in addition to your down payment.

Loan-Related Closing Costs

Most buyer closing costs are associated with obtaining a mortgage:

• Loan origination fee: Charged by the lender to process your mortgage, typically 0.5% to 1% of the loan amount
• Discount points: Optional upfront payments to lower your interest rate (1 point = 1% of loan amount)
• Appraisal fee: Pays for a professional property valuation required by the lender ($300-$700)
• Credit report fee: Covers the cost of pulling your credit history ($25-$75)
• Underwriting fee: Covers the lender's cost to verify your loan application ($400-$900)

Title and Settlement Costs

Buyers are typically responsible for:

• Lender's title insurance: Protects the lender's interest in the property ($500-$2,000)
• Title search: Verifies clear ownership of the property ($200-$400)
• Recording fees: Government charges to record the deed and mortgage ($50-$250)
• Settlement/escrow fee: Paid to the closing agent who facilitates the transaction ($500-$2,000)

Prepaid Items and Escrows

At closing, buyers typically prepay certain expenses:

• Homeowners insurance: First year's premium often due at closing
• Property tax escrow: Several months of property taxes held in escrow
• Prepaid interest: Daily interest charges from closing to your first mortgage payment
• HOA fees: Prorated homeowners association dues if applicable

Closing Costs Sellers Typically Pay

Sellers can expect to pay 6% to 10% of the sale price in closing costs, with real estate agent commissions making up the largest portion.

Real Estate Agent Commission

Traditionally, sellers pay the real estate commission for both agents involved in the transaction, typically 5% to 6% of the sale price split between the listing agent and buyer's agent. However, the 2024 NAR settlement has changed how commissions are negotiated, and buyers may now pay their own agent directly in some transactions.

Title and Transfer Costs

Sellers commonly pay:

• Owner's title insurance: Protects the buyer against title defects (varies by state, $1,000-$4,000)
• Transfer tax: State/local tax on transferring property ownership (varies widely)
• Title search fees: In some states, the seller pays for title research

Payoff-Related Costs

Sellers may have costs related to their existing mortgage:

• Mortgage payoff: Remaining balance on existing loan(s)
• Prepayment penalty: Some loans charge for early payoff (less common now)
• Recording fees: To record the mortgage satisfaction

Other Seller Costs

• Prorated property taxes: Taxes owed up to closing date
• HOA dues: Prorated association fees
• Home warranty: Often offered by sellers as a buyer incentive ($300-$600)
• Repairs or credits: Negotiated items from the inspection

State-by-State Closing Cost Variations

Closing cost customs vary significantly by state. Who pays for what often depends on local tradition, not just negotiation.

Who Pays Title Insurance by State

One of the biggest state-by-state variations is who pays for the owner's title insurance policy:

Note: These are general customs, actual responsibility depends on your purchase agreement.

Transfer Tax Variations

Transfer taxes (also called deed stamps, documentary taxes, or conveyance taxes) vary dramatically:

• No transfer tax: Alaska, Idaho, Indiana, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon, Texas, Utah, Wyoming
• Low transfer tax: Arizona, Colorado, Kansas, Kentucky, Michigan (0.1% or less)
• Moderate transfer tax: Most states (0.1% to 1%)
• High transfer tax: New York City, Washington DC, Delaware (1% to 4%+)

Can Closing Costs Be Negotiated?

Yes! Many closing costs are negotiable. Understanding which costs have flexibility can save you thousands of dollars.

Seller Concessions

Seller concessions (also called seller credits or seller contributions) allow the seller to pay a portion of the buyer's closing costs. This is particularly common when:

• The market favors buyers (more inventory, less competition)
• The home has been on the market for a while
• The buyer needs help with closing costs to afford the home
• Issues arise during the home inspection

Lenders limit how much sellers can contribute:

Lender Fee Negotiations

When shopping for a mortgage, you can negotiate certain lender fees:

• Origination fee: Some lenders will reduce or waive this fee
• Application fee: Often negotiable or waivable
• Rate lock fee: May be waived for competitive borrowers
• Underwriting fee: Sometimes negotiable

Pro tip: Get Loan Estimates from multiple lenders and use competing offers as leverage to negotiate fees down.

Service Provider Shopping

You can often choose your own service providers for:

• Home inspection company
• Title insurance (in most states)
• Homeowners insurance
• Settlement/escrow company

Shopping around can save hundreds or thousands of dollars on these services.

How to Reduce Your Closing Costs

For Buyers

1. Compare lenders: Get quotes from at least 3 lenders and compare Loan Estimates
2. Negotiate seller concessions: Ask the seller to contribute toward your closing costs
3. Look for grants and assistance: Many states offer closing cost assistance programs for first-time buyers
4. Choose a no-closing-cost mortgage: Some lenders offer to cover closing costs in exchange for a higher interest rate
5. Close at end of month: Reduces prepaid interest charges
6. Shop for services: Compare prices for title insurance, inspections, and other services

For Sellers

1. Negotiate commission rates: Agent commissions are not set by law and can be negotiated
2. Compare title companies: Get quotes for title and settlement services
3. Limit concessions: Only offer buyer concessions when necessary to close the deal
4. Review the HUD-1/Closing Disclosure: Check for errors or unexpected charges

Understanding Your Closing Disclosure

Three days before closing, you'll receive a Closing Disclosure that itemizes all closing costs. Review it carefully to understand exactly who pays what.

Key Sections to Review

• Page 2 - Loan Costs: All fees charged by your lender
• Page 2 - Other Costs: Title, government, and prepaid costs
• Page 3 - Calculating Cash to Close: Total amount you need to bring
• Page 3 - Summary of Transactions: Shows buyer vs. seller costs

Compare the Closing Disclosure to your Loan Estimate to ensure fees haven't increased unexpectedly. Some fees cannot increase, while others have limits on how much they can change.

Frequently Asked Questions

Can the seller pay all closing costs?

In theory, yes, but there are limits. Lenders cap seller concessions (typically 3-9% of the purchase price depending on loan type and down payment). The seller cannot pay more than these limits without the excess being considered a reduction in the sale price.

Are closing costs tax deductible?

Some closing costs are tax deductible, including:

• Mortgage interest (including prepaid interest)
• Property taxes (prorated portion you pay)
• Discount points (in most cases)

Other closing costs like title insurance, appraisal fees, and transfer taxes are typically not deductible for your primary residence but may be added to your cost basis.

Can closing costs be rolled into the mortgage?

Yes, in some cases. Options include:

• No-closing-cost mortgages: Lender covers costs in exchange for higher interest rate
• FHA and VA loans: Allow financing of certain fees into the loan amount
• Refinancing: Closing costs can often be rolled into the new loan balance

However, rolling costs into your mortgage means paying interest on them over the life of the loan.

Who pays closing costs in a cash purchase?

Cash buyers still have closing costs, though fewer than financed purchases (no lender fees). Cash buyers typically pay for:

• Title search and owner's title insurance
• Recording fees
• Home inspection (optional but recommended)
• Settlement/escrow fees
• Prorated property taxes

Sellers pay the same costs whether the buyer pays cash or finances.

What happens if I don't have enough for closing costs?

If you're short on closing cost funds:

• Negotiate seller concessions
• Apply for down payment and closing cost assistance programs
• Accept gift funds from family (with proper documentation)
• Choose a no-closing-cost loan option
• Delay closing to save more

The Bottom Line

Understanding who pays closing costs, buyer or seller, is essential for budgeting your real estate transaction. While traditional customs dictate many cost responsibilities, almost everything is negotiable in real estate.

Key takeaways:

• Buyers typically pay 2-5% of the purchase price in closing costs
• Sellers typically pay 6-10% of the sale price (including commissions)
• Many closing costs are negotiable
• Local customs and state laws affect who pays what
• Your real estate agent can help negotiate closing cost responsibilities

A knowledgeable real estate agent can guide you through the closing cost negotiation process and help you understand your local market's customs. They'll ensure you're prepared for all the costs involved in your transaction.

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