What are closing costs?

Closing costs refer to the various fees and expenses that are incurred when finalizing a real estate transaction. These costs are typically paid at the closing of the deal, the point at which ownership of the property is formally transferred from the seller to the buyer. Closing costs can include a wide array of expenses such as loan origination fees, title insurance, appraisal fees, attorney fees, recording fees, and prepaid taxes and insurance.

Understanding closing costs is crucial for both buyers and sellers, as these expenses can add a significant amount to the total cost of purchasing or selling a property. They are distinct from other types of costs associated with real estate transactions, such as ongoing monthly leasing fees or maintenance expenses related to rental properties. Additionally, while taxes on property sales may be part of the closing costs, they do not encompass the entirety of what closing costs entail. Thus, recognizing that closing costs are specifically tied to the transaction's completion helps clarify their importance in the real estate process.