Who Pays for What When Closing on a Home?

When it comes to closing costs — the fees and commissions associated with closing on a home — both the seller and the buyer are on the hook. Here’s a breakdown of who pays what.

When selling a home, there are a lot more numbers to consider besides the purchase price. Aside from any mortgage payoff and optional expenses like repairs, most of the expenses fall into the category of closing costs. If you’re not sure what closing costs actually are and who is responsible for paying for them, we don’t blame you—it can get confusing. That’s why we’re breaking it all down here.

What are closing costs?

Closing costs are fees paid at the closing of a real estate transaction and can be paid by either the buyer or the seller, depending on what the fee is and what was agreed upon in the purchase contract. They usually include commission, if working with a traditional real estate agent, as well as title and escrow fees, attorney’s fees, government taxes, and recording fees. They can also vary depending on the type of home and location.

Understanding closing costs

It’s important to understand who pays for what when selling a home so that you do not end up with any surprises.

Do buyers or sellers pay closing costs?

Buyers and sellers are also able to negotiate who pays for what during the offer process. Generally speaking, buyers tend to pay for most of the individual fees, but the fees that sellers pay are typically larger, the big one being the commission for a traditional real estate agent. You can avoid this fee by listing your house as for sale by owner (FSBO) or selling to an all-cash buyer who will typically cover all the closing costs in their offer.

Breaking Down Typical Closing Costs on a House

You already have a lot to think about when selling a house. This list is not exhaustive, but it will give you a good sense of who pays for what when it comes to closing costs.

Costs usually covered by the seller

As a seller, closing costs can reach 8% to 10% of the sale price of the home. The main reason it’s higher than the buyer’s is because the seller typically pays both the listing and buyer’s agent’s commission (typically 4 to 6% of the purchase price). Additional fees and taxes can total 2% to 4% of the sale.

The seller is typically responsible for paying all selling costs, such as:

  • Real estate commission
  • Owner’s title insurance
  • Transfer taxes
  • Mortgage payoff (if applicable)

Costs usually covered by the buyer

Closing costs for buyers are typically 2-5% of the purchase price. The buyer is generally responsible for costs associated with obtaining financing and anything related to ownership of the home, such as:

  • Loan origination fee
  • Appraisal fee
  • Title search fee
  • Lender’s title insurance
  • Survey charges

Costs that can be split or may go either way

  • Escrow fees are often split 50-50 between buyer and seller
  • Title insurance (both the buyer and seller pay for title insurance, but each type is slightly different)
  • Settlement fees
  • Property taxes (typically prorated for both seller and buyer)

Something to keep in mind: Any closing cost can potentially be covered by either the buyer or seller depending on the terms of the agreement. Some people even use covering closing costs as a way to entice the other to accept their offer.

Optional transaction costs you might pay as a seller

  • Home warranty (not required, but sellers can offer this to entice buyers)
  • Pre-listing inspection (not required and not part of the closing costs, but can give sellers a good picture of what the buyer’s inspection might find)
  • HOA fees
  • Attorney fees (Optional, but some states do require the presence of a real estate attorney during any home sale)

Industry Standard Closing Costs: What to expect

Every real estate transaction is unique, but these are the standard closing costs along with who pays them.

Fee Cost Who pays?
Agent commission 4% to 6% of the sale price Seller
Transfer tax (also known as title fee) Varies by state Seller
Title insurance Can range between $1,000 and $4,000 Buyers cover the lender portion and sellers cover the owner’s portion; or one can cover both
Escrow fees Either a flat fee or about 1% of the sale price; between $500 and $2,000 (depending where you live) Usually split 50-50
Loan origination fee Between 0.5% and 1% of the total loan amount Buyer
Appraisal fee Average is $350-$450 Buyer
Title search fee Between $75-$100 Buyer
Survey charges Varies by property; average is around $550 Buyer
Property taxes Varies Often prorated and split depending on the due date and when the buyer takes over the property
Attorney fees Varies Can be either; if you live in a state where it’s required, the fee is taken out of the proceeds of the sale

Sources: Zillow.com; homebay.com; bankrate.com

Selling a house can be expensive – how to reduce closing costs?

One of the best ways to reduce the closing costs when selling a home it to list it as for sale by owner (FSBO) or to sell to a cash buyer. Cash buyers—like the ones you’ll find on the Sundae marketplace—will typically offer to pay all of the closing costs for the seller in their offer, making it quick and easy for everyone.

Other Home Selling FAQs

Why does the seller pay both sides of the commission?

It’s standard practice. Why? Because the seller uses the traditional real estate agent’s services to make the sale, and they then split the commission with the buyer’s agent as a sort of incentive for bringing them someone to sell the house to.

How do traditional real estate agents get paid? By the person selling the house, or the person buying? Or both?

The seller typically pays the commission on the sale, which is then split evenly by the seller and the buyer real estate agents. However, you can technically negotiate who pays the commission, meaning the buyer could offer to pay or they could split it with the seller.

Because the commission is taken out of the proceeds of the sale, sellers often take this into consideration when deciding on their asking price and adjust accordingly.

Who pays for fees associated with specific advertising (real estate agent or seller)?

In general, traditional real estate agents are responsible for their own advertising budgets and costs.

How do people sell a house when the mortgage isn’t fully paid off?

This is actually very common. First, ask your mortgage lender about your current mortgage payoff amount and if there are any prepayment penalties. You’d then need to sell your home for an amount that covers your mortgage payoff, closing costs and any expenses for getting your home ready to sell. At closing, you’ll get any profit that’s left over.

Why are seller concessions capped?

Seller concessions refers to the amount that a seller agrees to pay for some or all of the buyers closing costs. The amount is typically capped by mortgage lenders in order to discourage inflation in the housing market. The limits vary by loan type.

Reducing the cost of selling a house

If you want to reduce the cost of selling your house, Sundae can help. By connecting you with a marketplace of fully trusted investors ready to buy your house as is, you can eliminate most if not all of the additional costs to sell your home. With Sundae, you’ll receive a list of all-cash offers within four business days—no muss, no fuss, no extra fees.

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