In a typical home sale, both the buyer and the seller pay closing costs, but they pay for different things. Buyers generally cover the fees tied to getting a mortgage, and sellers generally cover the costs of transferring ownership. That’s the default answer to who pays closing costs, and the purchase contract is what makes it final. Everything on the settlement statement is negotiable, and local custom shifts a few line items from one side to the other.
As a rough scale: buyer closing costs often land between 2% and 5% of the purchase price, while seller costs can reach 6% to 8% once agent commissions are included.
What Buyers Pay
Most of what a buyer owes at closing comes from the lender. Loan origination fees cover processing and underwriting and usually run 0.5% to 1% of the loan amount. On a $350,000 loan, that’s roughly $1,750 to $3,500. Some lenders bundle this into a single origination charge; others break it into separate processing and underwriting fees. The CFPB notes that you can ask a lender to justify any fee it charges, and some can be reduced or waived.1Consumer Financial Protection Bureau. Am I Allowed to Negotiate the Terms and Costs of My Mortgage at Closing
A credit report fee is the only charge a lender can collect before issuing your Loan Estimate, and it typically runs under $30.2Consumer Financial Protection Bureau. How Much Does It Cost to Receive a Loan Estimate Beyond that, buyers typically pay:
- Home appraisal, usually $300 to $500 for a standard single-family home, with higher prices in expensive metros and for larger or unusual properties.
- Home inspection, usually $300 to $500. Technically optional, almost always worth doing.
- Lender’s title insurance, which protects the lender against ownership disputes and scales with the loan amount.
- Recording fees charged by the county to file the deed and mortgage. These range from under $50 to over $100 depending on where you are.
Lenders also collect prepaid items at closing: homeowners insurance premiums, a prorated share of property taxes, and per-diem mortgage interest from the closing date through the end of the month. These are advance payments for obligations the buyer would owe anyway, not fees in the traditional sense, but they still come out of pocket at the table.
What Sellers Pay
The seller’s biggest expense is almost always the real estate agent commission. Historically, sellers paid both the listing agent and the buyer’s agent, with total commissions running 5% to 6% of the sale price. That changed in August 2024, when the National Association of Realtors settled a class-action lawsuit that reshaped how buyer-agent compensation works. Sellers are no longer required to offer compensation to the buyer’s agent through the MLS, and buyer-agent fees are now negotiated separately between the buyer and that agent. In practice, many sellers still agree to cover some or all of the buyer’s agent fee to attract offers, but it isn’t automatic. Recent data puts the average total commission around 5.5%, split roughly evenly between the two agents.
Beyond commissions, sellers commonly pay:
- Owner’s title insurance. In most markets, the seller buys a policy guaranteeing the buyer clear title free of undisclosed liens or claims.
- Transfer taxes. State and local governments often tax the property transfer, with rates ranging from a fraction of a percent to around 2% of the sale price depending on location.
- Mortgage payoff. Any remaining balance on the seller’s loan, including interest accrued through the closing date, comes out of the proceeds.
- Recording fees for the mortgage release, often $10 to $75, to clear the old lien from public records.
Some sellers also pay for a one-year home warranty as a buyer incentive. Basic plans run $500 to $700; more comprehensive ones cost more.
Who Pays What Can Be Negotiated
Nothing above is fixed. A buyer in a competitive market may offer to cover transfer taxes or the owner’s title policy. A seller in a slow market may offer to pay points on the buyer’s loan to buy down the rate. Local custom sets the starting point, but the purchase agreement sets the final allocation. Read every line of the contract before signing, because that document, not the norms, determines who writes which check.
Prorations Between Buyer and Seller
Some costs aren’t paid by one side or the other so much as split between them based on the calendar. Property taxes get divided according to who owned the home on each day of the billing period. If the seller has already paid the full year’s property taxes and you close in July, you reimburse the seller for the months you’ll own the home. If the taxes haven’t been paid yet, the seller credits you for the portion of the year they occupied the property. The math: divide the annual tax bill by 365 (or 366 in a leap year) and multiply by the number of days each party owned the home.
HOA dues, if applicable, are prorated the same way. Many homeowners associations also charge a transfer fee to process the ownership change, update records, and prepare disclosure documents for the buyer. These fees vary widely but often fall between $100 and $500. Who pays the HOA transfer fee is up to the contract.
Utility bills, prepaid oil or propane, and any rents collected in advance from tenants are also adjusted at closing. The settlement agent handles the calculations and shows each one as a credit or debit on the appropriate party’s side of the closing statement.
When the Seller Pays Some of the Buyer’s Closing Costs
Seller concessions are one of the most useful negotiating tools in real estate. The seller agrees to pay a portion of the buyer’s closing costs, either as a fixed dollar amount or a percentage of the sale price. The money doesn’t go directly to the buyer; it’s applied to specific closing costs on the settlement statement. Concessions are common in buyer’s markets or when a buyer has limited cash reserves after the down payment.
Each loan program caps how much the seller can contribute. For conventional loans backed by Fannie Mae, the limit depends on the loan-to-value ratio:
- LTV above 90%: up to 3% of the sale price.
- LTV between 75.01% and 90%: up to 6%.
- LTV at 75% or below: up to 9%.
Seller contributions above these limits trigger a dollar-for-dollar reduction to the property’s sale price for loan calculation purposes, and the lender recalculates the LTV using the lower figure.3Fannie Mae. Interested Party Contributions (IPCs)
FHA loans allow seller concessions up to 6% of the sale price regardless of down payment size. Anything above that reduces the sale price used to calculate the loan amount. VA loans take a different approach: they don’t limit seller credits toward the buyer’s actual closing costs, but they cap other seller concessions, such as paying off the buyer’s debts or covering the VA funding fee, at 4% of the property’s reasonable value.4U.S. Department of Veterans Affairs. VA Funding Fee and Loan Closing Costs
Where to See the Numbers Before Closing
Two federal disclosures show the full line-by-line breakdown of who pays what. The Loan Estimate must be delivered within three business days of your mortgage application and shows projected costs for each line item.5Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs The Closing Disclosure replaces it closer to settlement, reflecting the actual terms and final numbers. Federal regulations require the lender to make sure you receive the Closing Disclosure at least three business days before consummation.6eCFR. 12 CFR 1026.19 – Certain Mortgage and Variable-Rate Transactions
Compare the two documents side by side. Some fees are allowed to increase between the Loan Estimate and the Closing Disclosure; others are locked. Lender origination charges generally cannot increase at all. Third-party fees for services the lender selected also can’t rise. Fees for services the buyer chose a provider for have more flexibility. If a number jumps significantly and you don’t understand why, ask the loan officer before closing day. Resolving discrepancies is much easier before you’re sitting at the table.
Sellers see the equivalent breakdown on their side of the Closing Disclosure, showing the payoff to their existing lender, agent commissions, transfer taxes, title charges, prorations, and net proceeds.
Protect Your Money From Wire Fraud
Whoever is paying, this is where people lose real money. Scammers compromise the email accounts of real estate agents and settlement companies, monitor conversations to identify upcoming closings, then send spoofed emails with fraudulent wiring instructions. The CFPB has reported that these schemes surged over 1,100% between 2015 and 2017, with nearly $1 billion lost in a single year.7Consumer Financial Protection Bureau. Mortgage Closing Scams: How to Protect Yourself and Your Closing Funds
Before closing, establish two trusted contacts, typically your agent and the settlement agent, and confirm their direct phone numbers in person. When wiring instructions arrive, call one of those contacts at the number you already have (not a number from the email) to verify every detail: bank name, account number, routing number. Never email financial information, and don’t click links in any email claiming to contain updated instructions. A single verified phone call can prevent a six-figure loss.