What Are Closing Costs

What are closing costs on a house

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What are closing costs on a house?

The buying and selling of a house is one vital task. On one occasion or another, you may find yourself out there hunting for your dream home or selling your old home. If you are buying or selling the house for the very first time, you may find the entire process complicated. From finding the right home to finalizing the deal, there are a lot of steps that one has to follow. If not careful, you may end up missing a perfect deal in the market.

One of the few things that may confuse you as a newbie is the closing costs. So, what are closing costs on the house, you may ask? As the name implies, closing costs are usually fees associated with the sale or purchase of a home. These fees are generally paid at the end of the transaction. In simpler terms, the fees are paid when the house title is transferred from the seller to the buyer.

These costs comprise of the expenses one has to incur above the purchase price of the house. Understanding the closing costs is essential as it helps you prepare for the transaction in the best way. On average, the amount a buyer is going to pay ranges from 2-5%. However, the figure is dependent on various factors such as local taxes, the size of the loan, and fees.  Homeowners typically make the mistake of underestimating these type of costs when selling a home.

What are some examples of closing costs?

What closing costs do sellers pay when selling a home

Understanding what closing costs are is one thing, but knowing some examples of closing costs is another. Some examples of closing costs that you’re likely to accrue when finalizing a deal include;

  1. Appraisal fee

The decision to buy a new home, especially in a new locality, can be overwhelming. You are never sure where to start. Besides, after landing on a potential property, you are never sure if it’s worth the stated amount. That’s where you bring in a professional to help with evaluating the said property. Appraisal fees are the charges you will incur to get these services. The appraisal fee is dependent on the size of the housing and locality. But, it ranges between $300 and $450 for a single-family house and more for a larger home. 

  1. Origination fee

If you are buying a house using a loan, your lender may charge you an origination fee to initiate the loan. The charge is about $125. 

  1. Credit report fee

Lenders don’t just issue loans blindly. They rely on the credit report to define your credit score. Well, the credit report fee is the amount that your lender charges you to obtain your credit report. The cost is about $25 or more based on the situation.  

  1. Title search

With the rising cases of fraud related to the real estate industry, it’s good to be cautious when completing the transactions. One precaution you ought to take is ensuring that the house or property you are buying doesn’t have any issues with ownership. There is a fee of around $450 that you pay to confirm the house with the local property records. 

  1. Underwriting fee

Also known as a processing or administrative fee, underwriting fee is the cost you incur to evaluate your mortgage. On average, the charge is usually around 0.5% of the loan amount.  

  1. Title insurance

Title insurance is a fee that you pay as a homeowner if you wish to protect your financial interest in the property. That’s an added cost and usually about 1% of the issued loan. The insurance protects you in case there are issues with ownership after the transaction is finalized. 

If your trying to navigate through the process of selling you home, it's crucial you understand what the closing costs will be. There is nothing more frustrating then finding out at the closing table your cost to sell just went up another 3%.

Daniel D'Ambrosio, Real Estate Investor Tweet

Who normally pays closing costs?

who normally pays closing costs on a house

Now that you know what closing costs on the house are and the conventional examples, the question remains, who pays for these expenses? Well, both sellers and buyers have fees to pay at the end of a transaction. The total they paid is dependent on the negotiations between the two parties based on the market. Say, for instance, if the seller is looking to sell the house quickly, he or she may choose to take most of the buyer’s closing costs. In fact, in the modern market, sellers are willing to pay some of the buyer’s closing costs to get over with the entire transaction.  

Can a home seller decline to help with the closing costs?

As said earlier, both house owners and buyers have expenses to cover after finalizing the transaction. Therefore, a seller can refuse to pay your closing costs, as it means reducing his or her profit margins. Some sellers do agree to share foot in a part of the closing cost whenever they want to sell the house urgently.

If you are not able to convince the house seller to foot in some of the expenses, then you can liaise with your lender to add a portion of the entire closing costs in your loan. Unfortunately, this kind of arrangement doesn’t work for standard loans. It works on VA and VHA loans only. As a seller, if you opt to go this way, you must have in mind that the arrangement increases your mortgage, as well as the monthly repayments. 

How can I avoid paying closing costs?

can you avoid closing costs

Unfortunately, there is no way that you can do away with closing costs completely. However, there are various ways in which you can reduce the closing costs, and they include;

  • Shop around for settlement companies – In most states, title companies set their unique price structures. Therefore, it would be best if you opted for the best deal in the market. 
  • Sell your home through a discount broker –While selling a house through an agent is the most recommended trick, you can instead opt to list your home using a service broker. By doing so, you will be saving a portion of the the commission that you would have spent on an agent. 
  • Negotiate –As a buyer, you can negotiate with the homeowner to share the payment of closing costs. Most sellers in the market today are willing to go ahead and help with the amount as this helps to close the transaction quickly. 
  • Be smart with timing –Did you know that finalizing the deal near or at the end of the month helps lower the daily interest charges? Most likely, you had no idea. Well, you can make use of the trick to help save some cash during the transaction. 


Closing costs are typical when selling a property anywhere in the country.  Sure, these fees and expenses can be negotiated to a certain point but in the end, a homeowner will still have to lay out funds when selling a house. The actual sales value of the home will have a bearing on the amounts paid out due these closing costs.

If you decide that you would like to avoid paying closing costs altogether, please consider Cash Offer On House  as a viable solution. We can buy your home fast. You never pay commissions, service fees or closing costs. Learn more about why selling to us may be your best option.

To find out what we can pay for your house, click here and fill out the form or call our office at (888) 683-7909.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. CashOfferOnHouse.com always encourages you to reach out to an advisor regarding your own situation.

Sources Used For Article (not noted above)

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Don Phelps

Don Phelps

Don Phelps is Director of Marketing at CashOfferOnHouse.com, the real estate investment company that specializes in buying houses for cash in “as-is” condition. His focus is educating homeowners on navigating the complex and challenging world of selling real estate with confidence and ease. Don has worked on projects for numerous organizations and has a particular passion for real estate investing, SEO and football. Don's writing has been featured in Thrive Global, Activerain, Realtor.com, Today.com and Doffitt.com.


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