What are "closing costs" in a real estate transaction?

Closing costs represent a variety of expenses incurred during the final stages of a real estate transaction, directly linked to the process of transferring ownership from the seller to the buyer. These costs typically encompass fees for loan origination, title searches, title insurance, appraisal fees, and other administrative expenses that are settled at the time of closing.

Determining the costs associated with closing a real estate transaction is crucial for both buyers and sellers, as they are responsible for different portions of these expenses. Buyers may pay for items such as title insurance and recording fees, while sellers might cover agent commissions and transfer taxes. Understanding this definition allows all parties involved to prepare for the financial obligations they will face when finalizing a property sale and ensures a smoother transaction overall.