What are closing costs?
Closing costs are variable fees payable at the time a real estate transaction is
being concluded, and the title of the property is transferred from the seller to the buyer. Closing
costs are payable by the buyer or seller.
Examples of closing costs include title service costs, survey fees, origination fees, credit report
charges, brokerage commission, appraisal fees, inspection fees, mortgage application fees, etc.
The payment of these fees is necessary to the conclusion of a real estate deal and conveyance
of title. In some states in the U.S., the buyer is required to pay more than basic inspection fees.
Also, some state laws mandate the seller to pay some closing costs such as insurance.
By the Real Estate Settlement Procedures Act (RESPA), lenders are compelled to issue an
estimate of closing costs to the buyer within three days of taking a loan application from a
borrower. This estimate is also known as the “good faith estimate”.
Generally, closing costs are fees that are incurred apart from the purchase price of a property.
They are also payable only when the title of a property is transferred.