If you’re considering selling your home, then you’ve likely been thinking about home seller costs. And if you’re on the buyer’s side of the equation, then home buying costs are going to be an important aspect of the real estate market for you. But do you know everything they include, how much they cost, and who should pay them? There’s no denying that home sale closing costs are an inevitable part of selling or buying a home; they encompass all the fees that need to be paid at the closing table. However, the cost and party responsible for paying the closing fees on a house can vary depending on contract negotiations and the parties involved in the transaction. These are important factors to weigh, if you want to sell your house or if you’re simply looking to buy a home.
This article is intended to provide both sellers and buyers with an easy-to-understand comprehensive analysis. Defining what these costs specifically are, along with the average of these cost by state. Formatted into an easy to do, step by step guide, intended to help you understand how best to negotiate these costs.
Key Takeaways
- Home seller closing costs can range between 6%-10% of the purchase price of the home.
- closing costs for buyers in the first half of 2021 were $6,837 including taxes, and $3,836 excluding taxes.
- Determining who will pay home sale closing costs can be negotiated between the buyer and the seller.
- Understand Closing Costs
When buying or selling a home, there are closing costs, including real estate broker fees, fees connected to a lender, title charges, and transfer fees. Some closing costs are static, while others vary based on the purchase price of the home. All settlement fees are broken out line by line on the HUD-1 Settlement Statement, which is executed by the title company. Note that closing fees on a house can change depending on where you live and the type of home bought/sold (i.e., house vs. condo).
Realtor Fees
If an agent is involved in the real estate transaction, the agents’ commissions will be paid at closing. This includes both the buyer’s agent and seller’s agent commissions (typically 2%-3% of the sales price per agent). If no agents were involved in the sale or purchase of the home, the real estate agent fees are zero.
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Average Buyers Closing Costs Buy State
ClosingCorp has analyzed data on more than 1.9 million single-family purchase transactions that ran through there platform in the first half of 2021 and calculated the average amount buyers paid in closing costs.
Where you buy a home has a significant impact on what you’ll pay to close on the transaction. According to the data, buyers in Washington, DC, paid the most in closing costs with taxes, while the average Missouri buyer spent the least to close with taxes.
Here are the average closing costs by state, both with and without taxes owed at closing.
| State | Average Home Sales Price | Average Total Closing Costs with Taxes | Average Total Closing Costs without Taxes | Percentage of Sales Price (With Taxes) |
| DC | $753,631 | $30,352 | $6,524 | 4.03% |
| DE | $313,899 | $17,831 | $3,848 | 5.68% |
| NY | $520,460 | $17,582 | $6,301 | 3.38% |
| WA | $557,455 | $13,910 | $4,804 | 2.50% |
| MD | $386,810 | $12,056 | $3,975 | 3.12% |
| PA | $236,906 | $9,753 | $3,241 | 4.12% |
| CT | $418,948 | $8,849 | $4,131 | 2.11% |
| FL | $368,560 | $8,551 | $4,484 | 2.32% |
| CA | $779,838 | $8,219 | $5,773 | 1.05% |
| NH | $332,880 | $8,162 | $2,795 | 2.45% |
| NJ | $447,175 | $7,966 | $4,204 | 1.78% |
| HI | $777,764 | $7,559 | $5,977 | 0.97% |
| MA | $592,875 | $7,095 | $4,479 | 1.20% |
| NV | $410,263 | $6,504 | $4,328 | 1.59% |
| VA | $358,930 | $6,373 | $3,462 | 1.78% |
| VT | $287,233 | $6,269 | $3,192 | 2.18% |
| IL | $282,433 | $5,987 | $4,791 | 2.12% |
| MI | $200,331 | $5,704 | $3,501 | 2.85% |
| UT | $465,574 | $4,751 | $4,751 | 1.02% |
| RI | $392,302 | $4,683 | $3,053 | 1.19% |
| ME | $320,185 | $4,400 | $2,848 | 1.37% |
| OR | $448,156 | $4,392 | $3,935 | 0.98% |
| OH | $202,147 | $4,256 | $3,376 | 2.11% |
| ID | $402,043 | $4,101 | $4,101 | 1.02% |
| MN | $282,664 | $4,054 | $2,627 | 1.43% |
| TX | $294,899 | $3,946 | $3,946 | 1.34% |
| CO | $520,372 | $3,895 | $3,812 | 0.75% |
| AZ | $395,395 | $3,876 | $3,876 | 0.98% |
| TN | $262,382 | $3,869 | $2,655 | 1.47% |
| GA | $283,380 | $3,768 | $2,859 | 1.33% |
| LA | $220,594 | $3,629 | $3,301 | 1.65% |
| AK | $347,089 | $3,576 | $3,576 | 1.03% |
| NM | $306,594 | $3,489 | $3,489 | 1.14% |
| SC | $295,186 | $3,437 | $2,495 | 1.16% |
| WI | $225,039 | $3,424 | $2,658 | 1.52% |
| WV | $190,948 | $3,393 | $2,468 | 1.78% |
| SD | $208,904 | $3,064 | $2,806 | 1.47% |
| MT | $381,220 | $3,055 | $3,055 | 0.80% |
| AL | $209,562 | $2,994 | $2,629 | 1.43% |
| NC | $296,206 | $2,970 | $2,425 | 1.00% |
| OK | $177,778 | $2,938 | $2,549 | 1.65% |
| MS | $266,367 | $2,799 | $2,799 | 1.05% |
| KS | $275,764 | $2,793 | $2,793 | 1.01% |
| IA | $202,620 | $2,774 | $2,368 | 1.37% |
| NE | $220,266 | $2,764 | $2,194 | 1.25% |
| AR | $197,137 | $2,608 | $2,071 | 1.32% |
| WY | $337,354 | $2,510 | $2,510 | 0.74% |
| KY | $194,879 | $2,556 | $2,194 | 1.21% |
| ND | $240,774 | $2,321 | $2,321 | 0.96% |
| IN | $229,867 | $2,193 | $2,193 | 0.95% |
| MO | $238,276 | $2,102 | $2,102 | 0.88% |
Methodology
ClosingCorp average closing costs are defined as the average fees and transfer taxes required to close a conventional purchase transaction in a geographical area. These costs consist of fees from the following service types: title policies (both owners and lenders), appraisals, settlement fees, recording fees, land surveys and transfer tax.
Actual closing fees for 1.9 million single-family home purchases from January 1 through June 30, 2021 were analyzed. Homes within a $100,000 range of the average home price (source: CoreLogic, a leading global property information, analytics and data-enabled solutions provider) were used to estimate closing costs for an average single family residential home at the state, core-based statistical area (CBSA) and county levels.
The average service type component fee was computed for every geographical area where at least 10 transactions occurred in the specified range during the period under review. Total cost to close was then computed as the sum of the service type averages. Land survey fees only were included for Florida and Texas single-family homes where land surveys are required. Cost to close was computed with and without transfer taxes.
View source version on businesswire.com: https://www.businesswire.com/news/home/20211012005504/en/
Main Aspects of Realtor Fees and Closing Costs
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- Closing costs are the fees and charges more than the purchase price of the house payable at the settlement of a real estate sale.
- Both buyers and sellers will have to pay various closing costs.
- Closing costs generally include fees charged in relation to the creation and underwriting of a buyer’s loan, real estate commissions, taxes, insurance premiums, and title and record filings.
- Closing costs, by law, have to be divulged in advance to buyers and sellers and agreed upon/negotiated before a real estate transaction can be perfected.
Closing Costs for Sellers and Buyers Associated with a Buyers Loan
All the closing costs will be itemized on a loan estimate and closing disclosure. Below are 29 standard fees, buyers and sellers can expect to share. When the buyer uses a mortgage loan to purchase a seller’s property. Please note that not all these fees can or will be exclusive to buyers. Bear in mind that some of these fees will be shared or transferred to the seller, in one form or another at the negotiations table between the involved parties (seller and Buyer). There are many expenses involved with a buyer’s mortgage loan, and it is in the buyer’s best interest to find a way to transfer as many of these fees onto the seller as possible.
Closing Fees Itemized List
According to Investopedia.com below are 29 typical closing costs on a house. Incurred through the process of selling and/or buying a house, both the buyer and the seller can expect share in varying degree many of these fees. Additionally, the national average cost of each fee has been itemized with a link to the source of the data.
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- Application Fee: A loan application fee may be charged by the lender, to process a buyer’s mortgage application. Average Cost: ($300 to $500)
- Attorney Fee: In other words, this is a lawyer fee for buying a house charged by a real estate attorney to prepare and review home purchase agreements and contracts. This fee is applied at the discretion of a seller or buyer, and each party has the option of whether to hire an attorney. This is considered a best practice in regard to providing legal protection for either party. For more information, follow this lawyer fee for buying a house. Average Cost: ($1,000 – $2,000)
- Closing Fee: Also known as an escrow fee, this is paid to the party who hosts the closing documents, which could be the title company, an escrow company, or an attorney, depending on state law. This fee is not optional, as state law mandates a neutral third party to handle the legal documentation necessary at closing. Cost: (1%– 2% of the purchase price of the home)
- Courier Fee: If you’re signing paper documents, this fee helps expedite their delivery to the involved parties. If the closing is handled electronically, you might be subject to this fee. Cost: (expect to pay around $30 in courier fees if your lender charges them.)
- Credit Report Fee: This is a charge necessary in pulling the buyer’s credit reports from the three main reporting bureaus. Some lenders might not charge this fee because they build it into any of the various other fees. Cost: (Expect to pay $10 to $100 per credit report for each person who has applied for the loan.)
- Escrow Deposit: Most lenders require the buyer to deposit two months of property tax and mortgage insurance payments at closing into an escrow account.
- FHA Mortgage Insurance Premium: FHA loans require an upfront mortgage insurance premium (UPMIP) of 1.75% of the base loan amount to be paid at closing (or it can be rolled into the buyer mortgage). There’s also an annual MIP payment paid monthly that can range from 0.45%-1.05%, depending on the loan’s term and base amount.
- Flood Determination and Monitoring Fee: This is a fee charged by a certified flood inspector to determine whether the property is in a flood zone, which requires flood insurance (separate from a buyer’s homeowners insurance policy). One aspect of the fee includes ongoing observation to monitor changes in the property’s flood status over time. Cost: (The average cost of flood insurance in 2021 is $958 per year, or $80 a month, through the National Flood Insurance Program (NFIP)).
- Homeowner’s Association Transfer Fee: If you sell a townhouse, condominium, or property in a planned development, the buyer must join that community’s homeowner’s association (HOA). This is the transfer fee that pays the costs of switching ownership, such as document costs. Whether the seller or buyer pays the fee may or may not be in the contract; always check in advance. The seller will have to provide documentation showing HOA dues amounts and a copy of the HOA’s financial statements, notices, and minutes. A savvy buyer will be asking the seller to see these documents as well as the covenants, conditions, and restrictions (or CC&Rs), bylaws, and rules of the HOA before they buy the property to ensure the property is in good financial standing and a place that the buyer wants to live. Bear in mind that, if the buyer finds anything unfavorable upon inspection of the documents, they will likely use this as leverage in price negotiations or bail out of the deal altogether. Cost: ($200-$250)
- Homeowners Insurance: A lender usually requires the buyer to make prepayment of the first year’s homeowners insurance premium at closing. Cost: (The national average home insurance cost is $1,312 per year for $250,000 in dwelling coverage.)
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- Lenders Title Insurance: This is an upfront, one-time fee paid to the title company that protects a lender if an ownership dispute or lien arises that was not found in the title search. Cost: ($830 for homeowner policies.)
- Lead-Based Paint Inspection: A savvy buyer will exercise the option to pay a certified inspector to determine if the property has hazardous, lead-based paint, which is possible in homes built before 1979. Cost: (the national average for a lead paint inspection is $317.)
- Points: Points (or discount points) refer to an optional, upfront payment made by the buyer to the lender to reduce the interest rate on their loan and, thereby, lower the buyer’s monthly payment. One-point is the equivalent of 1% of the loan amount.
- Owners Title Insurance: A title insurance policy protects the buyer in the event someone challenges their ownership of the home (after the buyer takes ownership of the title). It is usually optional but highly recommended by legal experts. It usually costs 0.5%-1% of the purchase price.
- Origination Fee: The origination charge covers the lender’s administrative costs to process the buyer’s fees and is typically 1% of the loan amount. Some lenders do not charge origination fees, but if they don’t, they usually charge a higher interest rate or bury it into any of the other numerous fees to cover costs.
- Pest Inspection: This is a fee that covers the cost of a professional pest inspection for termites, dry rot, or other pest-related damages. Some states and some government-insured loans require the inspection. Cost: ($100 to $200 on average)
- Prepaid Daily Interest Charges: This is a payment to cover any pro rata interest on the buyer’s mortgage that will accrue from the date of closing until the date of the buyer’s first mortgage payment.
- Private Mortgage Insurance (PMI): if the buyer’s down payment is less than 20%, their lender could require PMI, and they may be required to make the first month’s PMI payment upfront at closing. PMI typically costs 0.5 – 1% of your loan amount per year.
- Property Appraisal Fee: This is a required fee paid to a professional home appraisal company to assess the home’s fair market value used to determine the buyer’s loan-to-value (LTV) ratio. It usually costs between $315 and $405, but those which require intensive work by the appraiser could run over $1,000.
- Property Tax: At closing, the buyer can expect to pay any pro rata property taxes that are due from the date of closing to the end of the tax year. The seller can expect to pay any past due property taxes up until the date of closing.
- Rate Lock Fee: This is a fee charged by the lender for guaranteeing the buyer a certain interest rate (locking in) for a limited period of time, typically from the time they receive a preapproval until closing. It can run from 0.25%-0.5% of the loan value. If a lender offers a rate lock for free, they simply just bury the expense into one or more of the various fees.
- Real Estate Commissions: Otherwise known as “realtor fees and closing costs,” this is one of the largest fees for both buyers and sellers’ real estate commissions. Buyers typically don’t pay this fee, though; sellers do. The commission charged by a broker is often 6%-8% of the home’s gross purchase price; this fee is then split evenly between the seller’s agent and the buyer’s agent. These fees can, however, be negotiated to make a deal close.
- Recording Fee: A recording fee will be charged by your local government recording office, typically a city or county clerk’s office, for the official processing of public land records. Cost: (the national average for recording fees is $125.)
- Survey Fee: This is a fee charged by a surveying company to inspect property lines and shared fences to confirm and document a property’s boundaries. Cost: (between $200 and $800, with the average being $500.)
- Tax Monitoring and Tax Status Research Fee: This third-party fee is necessary for keeping tabs on buyer property tax payments and notifying the lender of any issues with property tax payments, (i.e., late or failed payments). The cost changes depending on where the property is located and the company the lender employs. Cost: (typically around $50)
- Tittle Search Fee: This is a fee charged by the title company to analyze public property records for ownership discrepancies. The title company searches deed records and ensures that no outstanding ownership disputes or liens exist on the property. Costs: ($75 to $200)
- Transfer Tax: The transfer tax may be levied, depending on the jurisdiction, when the title is handed over from the seller to the buyer. State laws usually describe transfer tax as a set rate for every $500 of the property value.
- Underwriting Fees: Underwriting fees are charged by the lender for the work that goes into evaluating the risk associated with taking on the buyer’s loan. Underwriting is a research process of verifying and vetting the buyer’s finances, income, employment, and credit information for final loan approval. underwriting costs between $400 and $900, depending on the lender and loan type.
- VA Funding Fee: If your buyer is a VA borrower, this fee is charged as a percentage of the loan (1.65%) amount; this fee is necessary to offset the loan program’s costs to U.S. taxpayers. The amount of the fee depends on the buyer’s military service classification and loan amount. It can be paid at closing or rolled into mortgage.
View source version at
Investopidea.com: https://www.investopedia.com/mortgage/mortgage-guide/closing-costs/
- Understand the Bottom Line
When selling or buying a home, closing fees on a house are unavoidable. Above all, be your best advocate and understand that buyers and sellers can negotiate who pays for the home seller fees, and the various home seller costs can be documented in the purchase agreement and signed by both parties prior to closing. Know that estimating closing costs will typically range anywhere between 8%-10% of the purchase price of the house.
While buyers will usually pay for most of the home sale closing costs, it is important to note that, typically, sellers pay the commission for both real estate agents. When selling with an agent, this commission will be about 5%-6% of the final sale price for both the buyer’s and seller’s agents.
Other than your possible mortgage balance, agents’ commissions are the biggest cost when it comes to payments at the closing table. As a seller, you will also need to pay your share of the year’s property tax up until the day of closing. Any HOA fees or other community costs will be prorated and paid at this time as well.
- Negotiate Seller Subsidies
Important to both sellers and buyers, Seller subsidies are an amount the seller agrees to pay toward closing costs. These subsidies are negotiated between the buyer and seller. For example, a seller can offer to put 3% (seller agent fees) toward closing to help relieve some of the costs for the buyer and get the deal closed. Overall, paying these subsidies is often a small price to pay to bring retail buyers to the table.
- Implement Alterative Strategies to Lower Closing Costs
On the seller end of the spectrum Selling your home For Sale by Owner (FSBO). Allows you to lower closings costs, by removing the seller’s real estate agent commission. As the seller, you take on the role and responsibility of the agent. You are responsible for duties ranging from, marketing the home to negotiating terms, conditions, and price. If your buyer is not working with an agent, you can save the agent’s commission on the buyer side of the transaction as well.
The savings of an agent commission can add up to 5%-6% of the sale price. However, remember to account for the cost experience and know how involved you will need with marketing your own home when selling FSBO. Marketing can include professional photography, a flat fee MLS listing, attorney fees to draft a purchase agreement, home staging, and an appraisal to determine the ballpark value for your home.
In addition, selling for sale by owner is much more challenging and difficult than selling with an agent, so it’s important to account for the additional mortgage payments, insurance, property taxes, and utilities that need to be paid (holding costs) while waiting for the home to sell. Although a successful home sale by owner can lower the typical closing costs for the seller. It will cost you time and effort involved with learning what will be necessary for taking on these responsibilities. Understand that most FSBO attempts ultimately fail in one capacity or another, but with diligence and a winning attitude any challenges or failures in the process can be overcame.
About Justin Mitchell
Justin is a cash house buyer, with real world experience at finding solutions for people that are in the market to sell their house or investment property quickly for any reason.
Justin has experience with all types of buying and selling scenarios and understands how to make every transaction simple and stress-free. Additionally, he researches and writes real estate related content for various real estate related websites.
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