Closing Costs Explained: Buyer, Seller, or Both?

When buying or selling a home, one of the most significant financial considerations beyond the sale price itself is closing costs. These are the various fees and expenses incurred by both buyers and sellers during the property transaction. While they can add up to a substantial amount, understanding who normally pays closing costs is crucial for budgeting and negotiation. In 2026, these costs remain a vital part of any real estate deal, impacting your overall financial outlay.

Closing costs encompass a wide array of services and fees, ranging from loan origination fees and appraisal costs to title insurance and attorney fees. Depending on your location and the specifics of your transaction, these costs can typically range from 2% to 5% of the home's purchase price. For a $300,000 home, that could mean an additional $6,000 to $15,000 in expenses.

The Buyer's Share of Closing Costs

Buyers typically bear the brunt of closing costs, primarily due to expenses associated with securing a mortgage. Common buyer-paid fees include loan origination fees, which cover the lender's administrative costs, and appraisal fees, which determine the property's value. You'll also likely pay for a credit report, flood certification, and points (if you choose to pay interest upfront to lower your rate).

Beyond mortgage-related fees, buyers are often responsible for title insurance, which protects against future claims on the property, and escrow fees for managing the closing process. Prepaid expenses such as property taxes and homeowners insurance premiums for the upcoming year are also common. Being prepared for these expenses is key to a smooth closing. For unexpected expenses, an emergency cash advance can sometimes provide a temporary solution.

Key Buyer Expenses to Anticipate

Loan origination fees: Costs for processing your mortgage.
Appraisal fees: To determine the home's market value.
Title insurance: Protects against title defects.
Escrow fees: For the independent third party holding funds.
Recording fees: To officially record the new deed.

For a detailed breakdown of what buyers can expect, the Consumer Financial Protection Bureau (CFPB) offers resources on understanding your closing disclosure.

The Seller's Share of Closing Costs

While buyers generally pay more, sellers also have their share of closing costs. The largest expense for sellers is often the real estate agent commissions, which can be 5% to 6% of the sale price. Other common seller-paid costs include transfer taxes or recording fees, attorney fees (in states where legal representation is customary), and prorated property taxes up to the closing date.

Sellers might also be responsible for certain inspection fees, especially if repairs are negotiated after the home inspection. Sometimes, sellers may agree to cover a portion of the buyer's closing costs as part of the negotiation strategy to make the deal more attractive. Understanding these potential costs helps sellers price their homes effectively and manage expectations.

Typical Seller Costs to Budget For

Real estate agent commissions: The largest expense for sellers.
Transfer taxes: State or local taxes on property transfer.
Attorney fees: Where required or chosen.
Prorated property taxes: Covering the period until closing.

For more insights into seller responsibilities, Fannie Mae provides helpful guides on various aspects of homeownership and selling.

Negotiating Closing Costs: A Flexible Landscape

It's important to remember that many closing costs are negotiable. Both buyers and sellers can propose who pays for what during the negotiation process. For instance, a buyer might ask the seller to contribute towards their closing costs, especially in a buyer's market. Conversely, in a seller's market, buyers might have less leverage to make such requests.

The specific allocation of costs can also vary by state and even by local custom. Some regions traditionally place more responsibility on the buyer, while others see a more balanced split. Always consult with your real estate agent and legal counsel to understand local norms and to negotiate effectively. Unexpected expenses, even after careful planning, can sometimes arise during this process. In such moments, a fast cash advance can provide quick financial relief.

Managing Unexpected Financial Gaps

Even with thorough research into who normally pays closing costs, unforeseen expenses can emerge. Perhaps a critical repair is needed, or a last-minute fee pops up. In these situations, having quick access to funds can be invaluable. This is where options like an instant cash advance app can be a lifesaver, offering a temporary bridge until your next payday.

For those seeking financial flexibility without the burden of fees, Gerald offers a unique solution. Unlike many other apps that charge interest, late fees, or subscription costs, Gerald provides cash advances with zero fees. Users can shop now and pay later with no hidden costs, and access cash advances fee-free after making a BNPL purchase. This makes Gerald an attractive option for managing those unexpected financial needs that can often accompany major life events like buying a home. You can learn more about how a cash advance from Gerald works, and how it differs from traditional borrowing options.

Disclaimer: This article is for informational purposes only. Gerald is not affiliated with, endorsed by, or sponsored by the Consumer Financial Protection Bureau (CFPB) and Fannie Mae. All trademarks mentioned are the property of their respective owners.