Responsibility for closing costs in a home sale splits along predictable lines: the buyer pays the fees tied to getting a mortgage and taking title, and the seller pays the costs tied to transferring the property and paying off what’s already on it. Buyers commonly spend 2% to 5% of the purchase price at closing. Sellers usually spend more once real estate commissions and transfer taxes are counted. Almost every individual charge can be shifted by contract or by local custom, so the split you actually sign is rarely the default one.
What the Buyer Pays
Most buyer-side charges exist because a lender requires them. If you’re financing, expect these on your Closing Disclosure:
- Loan origination fee. Roughly 0.5% to 1% of the loan amount. On a $350,000 mortgage, that’s $1,750 to $3,500.
- Appraisal. Usually $300 to $500, more for complex or high-value properties.
- Credit report fee. Typically under $30. Federal rules cap this as the only fee a lender can charge before providing a Loan Estimate.1Consumer Financial Protection Bureau. How Much Does It Cost to Receive a Loan Estimate
- Private mortgage insurance. If your down payment is under 20% on a conventional loan, you’ll pay PMI as an upfront premium, a monthly charge, or both.2Consumer Financial Protection Bureau. What Is Private Mortgage Insurance
- Home inspection. A general inspection runs roughly $300 to $500. Specialized tests for radon, mold, or termites cost extra.
- Prepaid interest. Daily interest from your closing date through the end of the month, since your first mortgage payment won’t be due for 30 to 60 days.
- Escrow reserves. An upfront deposit covering several months of property taxes and homeowners insurance, so the escrow account starts with a cushion.
- Lender’s title insurance. Protects the lender against title defects. The buyer almost always pays.
- Wire transfer fee. $25 to $50 per transfer to send funds to the closing agent.
Total buyer costs commonly land between 2% and 5% of the purchase price. The percentage tends to shrink on more expensive homes because many fees are flat-dollar rather than percentage-based.
If You’re Paying Cash
Without a lender, most of the buyer bill disappears. No origination fee, no discount points, no credit report fee, no PMI, no prepaid interest, and no lender’s title policy. Your main costs shrink to an owner’s title insurance policy, the title search, recording fees, transfer taxes where they apply, and any inspections you choose to order. Cash buyers often close for well under 1% of the purchase price.
What the Seller Pays
Sellers face a bigger closing bill than buyers, driven mostly by commissions and transfer taxes.
- Real estate agent commissions. Historically the largest seller cost. Total commissions have been trending down, with national averages closer to 5% as of early 2025. On a $400,000 sale, that’s around $20,000.
- Transfer taxes. Most states and many municipalities tax the sale. Rates run from about 0.1% to over 2% depending on where you are, and some cities stack a local tax on top of the state rate.
- Mortgage payoff. Your remaining loan balance plus interest through the closing date comes out of the sale proceeds. Lenders may charge a small fee for the payoff statement.
- Outstanding liens. Property tax liens, judgment liens, or contractor liens must be cleared before title transfers. The settlement agent deducts these from your proceeds.
- Deed preparation. An attorney or settlement agent prepares the deed and other transfer documents. Fees usually run a few hundred dollars.
- Owner’s title insurance. In many markets the seller pays for the buyer’s owner’s policy, but this varies by region (see below).
- Home warranty. Sellers sometimes buy a warranty for the buyer covering appliance and system breakdowns for the first year. Basic plans run $400 to $700.
- HOA documents. If the property is in a homeowners association, the seller typically pays for the estoppel certificate or resale package. Costs range from nothing to $350 or more.
Everything above is deducted from the sale price to arrive at the seller’s net proceeds. The settlement statement lists every line.
Who Pays the Buyer’s Agent After the 2024 Rules
The default answer to “who pays the buyer’s agent” changed in August 2024. Under a National Association of Realtors settlement, listing brokers can no longer offer buyer-agent compensation through the MLS, and buyers must sign a written agreement with their own agent before touring homes that spells out exactly what the agent will be paid.3National Association of Realtors. Summary of 2024 MLS Changes
Buyer-agent compensation is no longer automatically bundled into the seller’s costs. Sellers can still offer a concession that covers the buyer’s agent, and many do, especially in competitive markets. But it’s no longer assumed. If a seller doesn’t offer to pay, the buyer is responsible for compensating their own agent, either out of pocket or by negotiating the amount into the purchase contract. The buyer-broker agreement is now one of the most important documents you’ll sign early in the process.
Shifting the Split: Concessions and Credits
Two mechanisms let a buyer short on cash push closing costs onto someone else: seller concessions and lender credits.
Seller Concessions
A seller concession is an agreement that the seller will pay some or all of the buyer’s closing costs. The amount comes out of the seller’s proceeds and gets applied to buyer fees. Loan program caps limit how much a seller can contribute.
For conventional loans backed by Fannie Mae, the cap depends on the loan-to-value ratio. Under 10% down (LTV above 90%), the seller can contribute up to 3% of the purchase price. With 10% to 24.99% down, the cap rises to 6%. With 25% or more down, the limit jumps to 9%.4Fannie Mae. Interested Party Contributions (IPCs) Any amount over the buyer’s actual closing costs is treated as a sales concession and gets deducted from the appraised value, which can sink the deal.
FHA loans allow seller contributions up to 6% of the sale price, covering origination fees, discount points, prepaids, and even the upfront mortgage insurance premium.5U.S. Department of Housing and Urban Development. What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower
VA loans work differently than many buyers assume. The VA does not cap how much a seller can pay toward ordinary closing costs like title fees, the appraisal, or recording charges. What the VA does cap at 4% of the home’s reasonable value are “concessions” such as paying the VA funding fee for the buyer, prepaying property taxes into escrow, buying down the interest rate, or paying off the buyer’s debts.6Veterans Affairs. VA Funding Fee and Loan Closing Costs
Lender Credits
When a seller concession isn’t available or isn’t enough, lender credits are the other path. Your lender gives you a flat dollar amount toward closing costs in exchange for accepting a higher interest rate. The credit shows up as a negative number on your Closing Disclosure and directly reduces what you owe at the table.7Consumer Financial Protection Bureau. How Should I Use Lender Credits and Points (Also Called Discount Points) The tradeoff is clear: less cash now, more interest over the life of the loan. If you plan to sell or refinance within a few years, lender credits often make financial sense. If you’re staying put for 15 years, the extra interest usually costs more than you saved.
Where Local Custom Decides
Regional practice moves several thousand dollars of costs from one party to the other depending on where the property sits.
Title Insurance
The owner’s title insurance policy is the most location-dependent charge. In parts of the South and Midwest, the seller customarily pays as a guarantee of clear title. In much of the Northeast and West, the buyer pays. The lender’s title policy almost always falls on the buyer regardless of region.
Settlement and Escrow Fees
The neutral third party handling funds and documents (a title company, escrow officer, or closing attorney, depending on the state) charges a settlement fee. In some markets it’s split evenly. In others, local custom assigns the full cost to one party. A handful of states require an attorney at closing, adding legal fees that may be split or assigned by practice.
Municipal Inspections
Some local governments require inspections or certifications before a home can change hands, such as smoke and carbon monoxide compliance certificates, septic inspections, and certificates of occupancy. Fees are generally modest, often under $200, and local ordinance typically assigns them to the seller as the one certifying the property meets code. Property surveys, when required, may fall on either party depending on regional custom.
Tax Effects of the Costs You Paid
Who paid a given cost matters at tax time.
For buyers, most closing costs are not deductible. The IRS limits deductions to three categories: mortgage interest paid at settlement (including prepaid interest), your prorated share of real estate taxes from the sale date forward, and discount points if the loan is on your main home, points are customary in your area, and the points are calculated as a percentage of the loan amount.8Internal Revenue Service. Tax Information for Homeowners Origination fees, appraisal costs, inspections, and title insurance are not deductible. You must itemize on Schedule A to claim any of these.
For sellers, closing costs paid at sale reduce taxable gain. Real estate commissions, transfer taxes, and other direct selling expenses come off the sale price to determine your amount realized. If you owned and lived in the home for at least two of the five years before the sale, you can exclude up to $250,000 in gain, or $500,000 if married filing jointly, from federal income tax.9Internal Revenue Service. Publication 523 – Selling Your Home Between the exclusion and the deduction of selling expenses, many sellers owe no federal tax on the sale. If your gain runs above those thresholds, tracking every deductible closing cost matters.