Closing costs are part of every real estate transaction, and there is no way around them. Who pays these expenses depends on the loan type, state rules, and the terms agreed upon by the buyer and seller during negotiations.
In most cases across the United States, buyers cover lender-related expenses, while sellers are responsible for commissions and certain transfer fees. The split, however, is not the same everywhere. What is considered standard in one state can look quite different in another.
California has its own set of practices that make closing costs both more detailed and more expensive compared with many other parts of the country. This guide explains the nationwide norms and then turns to California so you know what to expect before closing on a property.
What Are Closing Costs?
Closing costs are the fees and charges due at the end of a property sale. They cover the legal, financial, and administrative requirements that make the transfer of ownership official. For buyers, closing costs usually range between 2% and 5% of the purchase price.
1. Lender Fees
These include application fees, loan origination, and underwriting charges tied to securing financing.
2. Appraisal and Inspection
An appraisal confirms the home’s market value. Inspections check the property’s condition to ensure it meets standards before the sale closes.
3. Title Insurance
Most buyers pay for the lender’s title policy, which protects the lender against claims that could challenge ownership.
4. Escrow Services
Escrow companies hold funds and documents until both parties have met every condition of the sale.
5. Property Taxes and Prepaids
Buyers usually cover a share of property taxes, homeowners’ insurance, and other prepaid expenses to keep the property insured and current after closing.
Closing costs vary by state and loan type, but they are a standard part of every transaction. The next step is to see how these costs are divided between buyers and sellers nationwide.
Who Pays Closing Costs Nationwide?
In the United States, both buyers and sellers pay closing costs, but the expenses they cover differ. Buyers usually handle lender-related fees, while sellers are responsible for commissions and transfer taxes.
Buyer Closing Costs
Buyers take on the expenses tied to securing their loan and preparing the property for purchase. These typically include:
- Loan origination and underwriting fees
- Appraisal and home inspection charges
- Lender’s title insurance
- Buyer’s share of escrow fees
- Prepaid property taxes and homeowners’ insurance
Seller Closing Costs
Sellers cover costs tied to transferring ownership and finalizing the sale. Common charges are:
- Real estate agent commissions, often 5% to 6% of the sale price, are split between agents
- Transfer taxes and recording fees
- Deed preparation costs
- Owner’s title insurance policy in many states
- Outstanding property taxes or homeowners’ association dues
Nationwide, buyers usually spend about 2% to 5% of the purchase price on closing costs. Sellers often face higher totals because of commission fees.
Practices differ by state, and the final division of costs can shift depending on local rules and negotiation between the parties.
Buyer and Seller Closing Costs Nationwide
Both buyers and sellers pay closing costs, but the expenses differ depending on their role in the transaction. Buyers usually handle charges tied to financing and preparing the property for purchase.
These include loan origination, underwriting, and appraisal fees, along with the lender’s title insurance policy. Buyers also cover prepaid expenses such as property taxes and homeowners’ insurance.
Sellers take on costs tied to transferring ownership and completing the sale. The largest expense is typically realtor commissions, which often amount to 2.5% to 3% per agent. Sellers may also be responsible for title transfer fees, the owner’s title insurance policy in many states, and any property taxes or homeowners’ association dues owed up to the closing date.
Across the country, buyers usually spend between 2% and 5% of the purchase price on closing costs. Sellers often face higher totals because of commission obligations.
Can Closing Costs Be Negotiated?
Closing costs are not set in stone. Buyers and sellers often negotiate how these expenses are divided. One common approach is for buyers to ask for concessions, which are credits from the seller that lower the amount the buyer must bring to closing.
Concessions can be applied to fees such as the appraisal, title insurance, or prepaid taxes and insurance. Some buyers also explore no-closing-cost loans in California to reduce upfront expenses.
Loan type plays a major role in determining how much a seller can contribute. Conventional loans allow concessions of up to 9% of the purchase price in some situations. FHA loans set the limit at 6%, while VA loans cap concessions at 4%. These rules ensure sellers cannot cover all costs and keep both sides financially invested in the transaction.
Sellers may agree to cover part of the closing costs for several reasons. In competitive markets, concessions can make a property stand out to buyers who may be stretching their budgets after a down payment, especially those seeking VA home loans in California or second-time home buyers in California.
Contributing to closing costs can also be a bargaining tool when buyers are hesitant or when a property has been listed for longer than expected.
Buyer vs Seller Closing Costs Breakdown
Both buyers and sellers cover expenses at closing, though their responsibilities differ. The table below outlines who pays the closing costs most often in a typical transaction.
| Buyer Closing Costs | Seller Closing Costs |
|---|---|
| Loan origination and underwriting fees | Realtor commissions, usually 5%–6% of the sale price, are split between agents. |
| Appraisal and home inspection charges | Owner’s title insurance policy in many states |
| Lender’s title insurance | Transfer taxes and recording fees |
| Buyer’s share of escrow fees | Deed preparation costs |
| Prepaid property taxes and homeowners’ insurance | Property taxes and homeowners association dues owed up to closing |
Across the country, buyers generally spend between 2% and 5% of the purchase price on closing costs. Sellers often face higher totals because of commission fees. This buyer vs seller closing costs breakdown shows the typical financial responsibilities each side should plan for.
Closing Costs in California: Who Pays What?
In California, closing costs usually average about 1% of the sale price. On a $500,000 home, that equals around $5,000, though higher property values often push the total above this estimate.
1. Buyer Costs in California
Buyers usually pay for escrow services, lender-related fees, and the lender’s title insurance policy. These costs follow national standards but can add up quickly in California, especially for a first-time home buyer in California facing higher property prices than the national average.
2. Seller Costs in California
Sellers are generally responsible for transfer taxes, the owner’s title insurance policy, and real estate agent commissions. Among these, commissions are often the most expensive item and can exceed the combined total of other seller-related costs.
3. Regional Differences
Customs also vary within the state. In Northern California, buyers are more likely to pay for title insurance, while in Southern California, this responsibility often shifts to the seller. These differences show how closing practices can change depending on location.
4. Why California Costs Stand Out
Because property values in California are higher, both buyers and sellers face closing costs that amount to larger dollar figures compared with many other states. Knowing what to expect helps both sides prepare before they enter the market.
California’s unique practices highlight the importance of reviewing local customs before closing. The next section addresses common questions about who pays specific fees at closing.
How ID Mortgage Broker Helps You Save on Closing Costs
Closing costs can be confusing, especially when buyers and sellers are uncertain about which fees are negotiable and which are fixed. Expert guidance can make the process easier to manage.
ID Mortgage Broker works with clients to explain the full breakdown of buyer and seller responsibilities and then creates strategies to reduce costs where possible. By streamlining loan structuring and identifying opportunities for concessions, we help lower upfront expenses while keeping the transaction on track.
Options such as conventional loans in California or FHA loans in California can also be structured to suit different financial needs.
Every market has its own rules, and California has unique customs that affect who pays closing costs. Our team provides advice based on location, loan type, and financial goals so that clients enter negotiations prepared and confident.
With ID Mortgage Broker, you gain the clarity to manage costs and the support to negotiate terms that align with your situation.
Closing Costs Do Not Have to Be Confusing
Both buyers and sellers share responsibility for closing costs, though the split depends on the loan type, local practices, and negotiations. In California, the process carries added complexity, with regional customs and higher property values shaping who pays what.
Contact ID Mortgage Broker today for clear guidance on closing costs and mortgage solutions tailored to your financial goals, whether you are considering a cash-out refinance or planning to buy a house as a non-U.S. resident.
