What are closing costs in a real estate transaction?

Closing costs in a real estate transaction refer to the various fees and expenses that are incurred separately from the purchase price of the property. These costs can include a variety of items such as loan origination fees, appraisal fees, title insurance, homeowner's insurance, escrow fees, and transfer taxes, among others. They typically cover the services required to complete the transaction and can be paid by either the buyer or the seller depending on the agreement made during negotiations.

Understanding that closing costs are distinct from the purchase price is vital for buyers and sellers alike, as they can significantly impact the overall financial commitment involved in transferring property ownership. Being aware of these costs helps buyers prepare for the total out-of-pocket expenses they will face when finalizing the sale, beyond just the property's listed purchase price.