What are closing costs?

5 Replies

I know this may sound like a crazy question, but I would like it clarified.

  • What are closing costs?
  • What expenses are including in the closing costs?
  • Any general rule of thumb/guideline for estimating closing costs?

Thanks, Chris

That's a loaded question and depends on a lot of things, including what state you're in, whether you're the buyer or seller, and what your financing is.

Here's a rundown of Seller Closing Costs in Texas...

  • Settlement Fee - Charged by the title company to close the sale and is a % of sell price.
  • Document Prep - Yep...the title company charges for preparing the documents for closing.
  • Recording Fees - Any necessary filings to clear the title/deed.
  • Title Insurance
  • Misc Fees

Texas Buyer Closing Costs...

  • Settlement Fee - Charged by the title company to close the sale and is a % of sell price.
  • Recording Fees - Charge for recording the new deed
  • Loan Fees - Origination fee, doc fee, points, down payment, etc.

Those are the standard charges, broken down by Buyer & Seller, in Texas.  Additionally, depending on the deal and the availability of recent, existing reports, you may be looking at fees for...

  • Sales Commissions
  • Appraisals
  • Surveys
  • Inspections

Sellers are often asked to pay for specific items or contribute a fixed $ amount toward a buyer's closing costs. There are specific items required to be paid by specific parties. There are also limits, when FHA or Fannie/Freddie loans are used, as to the max that a seller can contribute to a buyer's closing costs. I believe it is currently 6% of the purchase price.

You should contact a title company or closing attorney for a breakdown and estimate of charges specific to your state.

Hope that helps!

In my state we have transfer taxes. 

If you get a loan that requires escrow of property taxes and insurance, then those will have pre-payment amounts due at purchase. 

Now, there are purchase closings and loan refinance closings, so some closing costs might not always apply. 

@Hattie Dizmond  Totally agree with everything she said when it comes to break down.

For a "quick" down and dirty estimate on how a properties "closing costs" will be I use

  • Seller- 10%
    • 6% - Real Estate Agent Fee's
    • 3.5%- Closing Cost Assistance for Seller
    • .5%- Oh Shoot, Buffer, allows for easy math
  • Buyer
    • 4.5-5% - (minus any seller assistance)

Don't forget in addition to the cost of doing a real estate deal. You will also have "escrow" fees that you have to pay to start out your account. Off the top of my head I believe it is 6 months of taxes and 3 months of insurance (it could be reversed). 

@Hattie Dizmond  @Steve Babiak  Elizabeth Colegrove 

Wow, thank you all for the detailed response. Closing costs are the less exciting, but necessary expenses that I need to learn to budget for. I had no idea they were that involved.

I will confirm how closing costs are structured based on the state I am focusing on.

I appreciate the support.


One of the largest closing costs can be adjustments for taxes. Lets say taxes are due Jan 1 and the seller pays them for the year. You settle the property Feb1. You owe the seller for 11 months worth of property taxes. 

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