Who Pays Closing Costs: Buyer vs Seller Breakdown by Fee Type
Closing costs are split between buyer and seller, but the division varies by fee type, local custom, and negotiation. Buyers pay lender fees, prepaid items, and insurance. Sellers pay transfer taxes, title insurance in many states, and real estate commissions. Seller concessions can shift a portion of buyer costs to the seller.
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Buyer Costs
- Lender fees: Origination fee ($1,000-$3,000), underwriting fee ($500-$1,000), appraisal ($400-$700), and credit report ($50-$100)
- Third-party fees: Title search ($200-$400), title insurance (varies by state), attorney fee where required ($500-$1,500), and survey ($300-$600)
- Prepaid items: Homeowners insurance (first year), property taxes (prorated), prepaid interest (per-diem from closing to first payment), and escrow reserves
- Action: Request the Loan Estimate from each lender within 3 days of applying — it itemizes every buyer-side closing cost for easy comparison
Seller Costs
- Real estate commissions: 5-6% of the sale price historically, though 2024 NAR settlement changes mean buyer and seller now negotiate separately
- Title insurance: In many states, the seller pays the owner’s title insurance policy — typically $1,000-$3,000 depending on the sale price
- Transfer taxes: State and local taxes on the property transfer — varies from 0% (some states) to 2%+ (New York City, Washington DC)
- Action: Sellers should request a net sheet from their agent showing all estimated costs subtracted from the sale price to understand net proceeds
Seller Concession Limits
- Conventional: 3% of purchase price at 90%+ LTV, 6% at 75-90% LTV, 9% at 75% or below — limits set by Fannie Mae and Freddie Mac
- FHA: Up to 6% of the purchase price regardless of LTV — can cover what you pay at closing, prepaid items, and rate buydowns
- VA: Up to 4% of the purchase price for buyer closing cost concessions (separate from discount points and prepaid items)
- Action: Include seller concession requests in your purchase offer — in 2026, approximately 35-40% of transactions include some form of seller concession
2026 Commission Changes
- NAR settlement: Since August 2024, buyer and seller agent commissions are no longer automatically linked — each party negotiates their own agent’s fee
- Buyer impact: Buyers may now be responsible for their own agent’s commission (typically 2.5-3%), which can be paid at closing, financed through seller concessions, or negotiated with the agent
- Seller impact: Sellers are no longer required to offer compensation to buyer agents through the MLS, though many still do to attract offers
- Action: Discuss commission structure with your agent before signing a buyer representation agreement — understand what you will pay and how
Frequently Asked Questions
How much are closing costs in total?
Can the seller pay all closing costs?
Are closing costs tax deductible?
The Bottom Line Up Front
Both buyers and sellers pay closing costs, but they pay different things. Buyers cover lender fees, prepaid items, and title insurance in some states. Sellers cover real estate commissions, transfer taxes, and title insurance in other states. Seller concessions allow part of the buyer’s costs to shift to the seller — within program limits of 3-9% depending on loan type and LTV.
The total closing cost picture depends on your specific transaction, location, and negotiation. Buyer costs average 2-5% of the loan amount. Seller costs average 6-10% of the sale price. Seller concessions are the primary tool for reducing buyer cash requirements at closing — in 2026, requesting concessions is standard negotiation, not a sign of weakness. Understanding which fees each party typically pays and which are negotiable puts you in the strongest position at the closing table.
- Buyer closing costs average 2-5% of the loan amount — on a $350,000 loan, expect $7,000-$17,500 in fees, prepaid items, and insurance
- Seller closing costs average 6-10% of the sale price including real estate commissions, transfer taxes, and title insurance in many states
- Seller concession limits vary by program: conventional 3-9% (by LTV), FHA 6%, VA 4% — concessions can cover buyer closing costs, prepaid items, and rate buydowns
- 2024 NAR settlement changed commission structure — buyers and sellers now negotiate agent fees separately, potentially adding a new buyer expense of 2.5-3%
Which Closing Costs Does the Buyer Pay?
Buyer closing costs fall into three categories: lender fees, third-party fees, and prepaid items. The total typically ranges from 2-5% of the loan amount and is itemized on the Loan Estimate provided within three business days of application.
- Origination fee: 0.5-1% of the loan amount ($1,750-$3,500 on $350K) — the lender’s charge for processing and underwriting the loan
- Appraisal: $400-$700 — paid by the buyer to assess the property’s market value for the lender’s collateral evaluation
- Title insurance (lender’s policy): Varies by state — protects the lender against title defects; separate from the owner’s policy (often paid by seller)
- Prepaid interest: Per-diem interest from the closing date to the first monthly payment date — typically $30-$80 per day depending on the loan amount and rate
- Escrow reserves: 2-6 months of property tax and insurance payments deposited into the escrow account at closing to fund the first tax and insurance payments when due
- Recording fees: $100-$500 — county recorder’s charge to officially record the deed and mortgage
Which Closing Costs Does the Seller Pay?
Seller costs are dominated by real estate commissions, which historically accounted for 5-6% of the sale price. Transfer taxes and title insurance (in states where the seller pays) add to the total.
- Real estate agent commissions: Historically 5-6% of sale price split between listing and buyer agents; post-2024 NAR settlement, each party’s commission is negotiated separately
- Transfer taxes: State and local taxes on the property transfer — ranges from 0% (some states have no transfer tax) to over 2% in high-tax jurisdictions
- Owner’s title insurance: In many states (Florida, New York, and others), the seller traditionally pays for the owner’s title insurance policy — $1,000-$3,000
- HOA transfer/estoppel fees: $200-$500 — charged by the HOA to provide the association’s financial records and account status to the buyer
- Seller’s attorney: $500-$1,500 where attorney representation is customary or required
- Prorated property taxes: The seller reimburses the buyer for property taxes already paid that cover the period after closing
Fee-by-Fee Breakdown: Who Typically Pays What
| Fee | Typically Paid By | Negotiable? | Approximate Cost |
|---|---|---|---|
| Loan origination | Buyer | Yes (lender credits) | 0.5-1% of loan |
| Appraisal | Buyer | No | $400-$700 |
| Home inspection | Buyer | No | $300-$600 |
| Title search | Buyer | Yes (shop around) | $200-$400 |
| Lender’s title insurance | Buyer | Yes (shop around) | $500-$1,500 |
| Owner’s title insurance | Varies by state | Yes | $1,000-$3,000 |
| Recording fees | Buyer | No | $100-$500 |
| Transfer taxes | Varies by state | Sometimes | 0-2%+ of price |
| Real estate commissions | Negotiated separately | Yes | 2.5-3% per agent |
| Attorney fees | Each party pays own | Yes | $500-$1,500 |
| Escrow reserves | Buyer | No | 2-6 months taxes+ins |
| Prepaid interest | Buyer | No (timing-dependent) | $30-$80/day |
Seller Concession Limits by Loan Program
Seller concessions allow the seller to contribute a fixed dollar amount or percentage toward the buyer’s closing costs. The maximum contribution is set by the loan program and cannot be exceeded regardless of what the parties agree to in the contract.
| Program | Max Seller Concession | Can Cover |
|---|---|---|
| Conventional (90%+ LTV) | 3% of purchase price | Closing costs, prepaid items, rate buydown |
| Conventional (75-90% LTV) | 6% of purchase price | Closing costs, prepaid items, rate buydown |
| Conventional (<75% LTV) | 9% of purchase price | Closing costs, prepaid items, rate buydown |
| FHA | 6% of purchase price | Closing costs, prepaid items, rate buydown |
| VA | 4% of purchase price | Closing costs (separate from discount points) |
| USDA | 6% of purchase price | Closing costs, prepaid items |
Deal Saver
On a $400,000 FHA purchase, the maximum seller concession is $24,000 (6%). Total buyer closing costs on this transaction are typically $12,000-$16,000. This means the seller can cover all buyer closing costs and still have $8,000-$12,000 of concession left over for a rate buydown. Ask your lender to model how a seller-funded 2-1 buydown using excess concession dollars reduces your monthly payment.
How to Negotiate Closing Costs
Closing costs are more negotiable than most buyers realize. The Loan Estimate identifies which fees are set by the lender (potentially negotiable) and which are third-party services you can shop independently.
- Compare Loan Estimates: Get LEs from 3-5 lenders and compare origination fees, underwriting fees, and lender credits side by side — the same loan can cost $2,000-$5,000 more at one lender than another
- Shop title and settlement services: Your Loan Estimate lists “services you can shop for” — title insurance, settlement agent, and survey fees vary significantly between providers
- Request lender credits: Accept a slightly higher rate (0.125-0.25%) and the lender pays part of your closing costs — useful when cash is limited
- Negotiate seller concessions: In 2026’s market, seller concessions are common — include a concession request in your offer to reduce out-of-pocket costs
- Close at end of month: Prepaid interest charges cover the days from closing to the first payment — closing on the 28th instead of the 5th saves 23 days of prepaid interest
- Ask about fee waivers: Some lenders waive appraisal fees, application fees, or credit report fees as promotional incentives — always ask what can be waived
2026 Commission Rule Changes and How They Affect Closing Costs
Following the 2024 NAR settlement, real estate commission structures changed significantly. Buyers and sellers now negotiate their own agent’s compensation separately, which can affect the total closing cost picture for both parties.
- Sellers are no longer required to offer compensation to buyer agents through the MLS — though many still do to make their listing attractive to buyer agents
- Buyers may now need to pay their own agent’s commission (typically 2.5-3%) if the seller does not offer buyer agent compensation
- Buyer agent commissions can potentially be covered by seller concessions if the concession program limit allows it — check with your lender
- Some buyers are negotiating directly with their agents for flat fees or reduced commissions, lowering the total commission cost of the transaction
How Closing Cost Responsibility Varies by State
Closing costs vary significantly by state due to differences in transfer taxes, title insurance practices, attorney requirements, and recording fees. A $350,000 purchase in Texas costs thousands less in closing fees than the same purchase in New York.
- High-cost states: New York, Connecticut, Washington DC, and Hawaii have the highest closing costs due to transfer taxes exceeding 1-2% and attorney requirements
- Low-cost states: Missouri, Indiana, and Nebraska have among the lowest closing costs with minimal transfer taxes and fewer mandatory fees
- Attorney states: Connecticut, Delaware, Georgia, Massachusetts, New York, South Carolina, and others require attorney representation at closing, adding $500-$1,500
- Title insurance customs: In some states the seller pays owner’s title insurance; in others the buyer pays — this single item can shift $1,000-$3,000 between parties depending on local custom
The Bottom Line
Closing costs are a significant part of every home purchase, typically totaling $30,000-$45,000 combined between buyer and seller on a $350,000 transaction. The buyer’s share (2-5% of the loan) covers lender fees, prepaid items, and title insurance. The seller’s share (6-10% of the sale price) covers commissions, transfer taxes, and title insurance in some states. Seller concessions are the primary tool for reducing buyer cash requirements.
Before making an offer, ask your lender for a detailed Loan Estimate and your real estate agent for a closing cost estimate based on your specific location and transaction. Compare costs across lenders, shop third-party services, and include seller concessions in your offer. Understanding who pays what — and which costs are negotiable — puts you in control of the largest transaction of your financial life.
Frequently Asked Questions
Can closing costs be rolled into the mortgage?
On VA and USDA loans, the upfront fees (VA funding fee, USDA guarantee fee) can be financed into the loan. On all programs, closing costs themselves cannot be added to the loan balance, but seller concessions and lender credits effectively reduce the cash needed at closing. The FHA upfront MIP (1.75%) is routinely financed into the loan amount.
What are junk fees?
‘Junk fees’ is an informal term for lender charges that seem duplicative or unnecessary — processing fees, administrative fees, email/courier fees, and rate lock fees. Not all of these are illegitimate, but some are negotiable or can be eliminated by choosing a different lender. Compare the ‘Loan Costs’ section of Loan Estimates across lenders to identify and challenge questionable fees.
Do I get closing costs back if the deal falls through?
It depends on the fee and the timing. The appraisal fee, inspection fee, and credit report fee are typically non-refundable because the services were performed. The earnest money deposit is refundable if you cancel within your contingency period. Lender application fees may or may not be refundable depending on the lender’s policy.
Should I ask for seller concessions or a lower price?
In most cases, seller concessions are more beneficial than a price reduction of the same amount. A $10,000 price reduction saves you approximately $50/month on the mortgage payment. A $10,000 seller concession eliminates $10,000 in cash you need at closing. If cash conservation is your priority, concessions win. If long-term payment reduction is the goal, the price reduction wins.
What is the 3-day closing disclosure rule?
Federal law (TRID) requires the lender to provide the Closing Disclosure at least 3 business days before closing. This gives you time to review the final figures and compare them to the Loan Estimate. If the CD shows fee changes beyond tolerance limits, the lender must provide a revised CD and a new 3-day waiting period.
Can I negotiate closing costs after the Loan Estimate?
Yes. The Loan Estimate is an estimate, not a contract. You can negotiate lender fees before locking the rate. Third-party services listed as ‘services you can shop for’ can be switched to cheaper providers at any point before closing. Seller concessions can be renegotiated through a contract amendment if both parties agree.