Finance
What is closing costs?
Closing costs are the fees and charges payable at completion of a property sale, separate from the purchase price — typically including loan origination, title, escrow, recording, and prepaid taxes and insurance.
They usually run to a few percent of the purchase price, though the exact composition varies enormously by jurisdiction. Who pays which item is partly convention and partly negotiable.
A seller concession — the seller agreeing to cover part of the buyer's closing costs — is a common negotiating instrument, particularly in a buyer's market, because it reduces the cash a buyer needs at completion without changing the headline price.
Buyers are frequently surprised by these because early budgeting focuses on deposit and monthly payment. Raising them early is a straightforward way to avoid a late crisis.
Related terms
Escrow is an arrangement where a neutral third party holds funds and documents on behalf of a buyer and seller, releasing them only once every agreed condition of the sale has been satisfied.
Title insurance protects a buyer or lender against financial loss from defects in a property's ownership record — undisclosed heirs, forged documents, unpaid liens or boundary errors that surface after purchase.
A property is under contract when a seller has accepted an offer and both parties are bound by a purchase agreement, but the sale has not yet completed because contingencies or closing steps remain.
A buyer's market is one where available inventory exceeds demand, giving buyers negotiating leverage on price, terms and repairs, and leaving sellers competing for a smaller pool of purchasers.