A common misconception about real estate transactions is that just one party, buyer or seller, pays all the closing costs. One party paying all closing costs almost never happens.
Typically, both buyer and seller have closing costs, that are generally broken down as:
- Buyers pay closing costs related to getting a mortgage, including appraisal, mortgage origination, lender required title insurance, and other mortgage lender fees.
- Sellers pay closing costs related to officially transfering ownership of the property on the government property tax records, such as deed preparation, deed recording, IRS required tax form filings, recording proof that the seller's mortgage has been paid off, etc. Many states/counties/jurisdictions charge a transfer tax on the real estate sale transaction as well.
The determination of who pays for a closing cost is generally determined by a combination of what the purchase agreement says and local custom.
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