Who Pays Closing Costs in a Home Sale

Closing costs are split between buyer and seller, but who pays what depends on your state, your contract, and what you negotiate

There is no single rule. In some states, sellers traditionally pay most closing costs. In others, buyers do. In practice, the contract you sign determines who pays for each specific cost — and that contract is negotiable before you sign it. The buyer's lender also sets requirements about what the seller can and cannot pay for. Your real estate agent and attorney can tell you what is standard in your area, but nothing is locked in until both parties agree and sign.

The costs themselves fall into categories: some almost always go to the buyer, some almost always go to the seller, and some are genuinely up for negotiation. Understanding which is which helps you know where you have room to push back or where you should expect to pay.

Key Takeaways

• Closing costs are negotiable in your purchase contract, so who pays what is not determined by your state alone — it is determined by what you and the seller agree to in writing.
• The buyer's lender sets limits on what the seller can pay for on the buyer's behalf, typically capping seller contributions at 2 to 6 percent of the home price.
• Costs that almost always fall to the buyer include the appraisal, inspection, homeowners insurance, and loan origination fees.
• Costs that almost always fall to the seller include the real estate agent commission, title insurance for the buyer, and the cost of fixing issues the inspection found.
• Property taxes, transfer taxes, and recording fees vary by state and are often split or assigned based on local custom, which your agent should explain before you make an offer.

Costs the buyer almost always pays

The buyer pays for the appraisal, which the lender requires before approving the loan. This typically costs $300 to $700 depending on the home's size and location. The buyer also pays for the home inspection, which runs $300 to $500 and is ordered by the buyer to learn what repairs the home needs.

The buyer pays loan origination fees, which the lender charges to process and underwrite the mortgage. These are usually 0.5 to 1 percent of the loan amount. The buyer also pays for homeowners insurance, which the lender requires before closing — you must have a policy in place and provide proof to the title company.

The buyer typically pays for the credit report the lender pulls, survey fees if the lender requires one, and any title insurance the buyer chooses to purchase for their own protection (separate from the policy protecting the lender). If the buyer is taking out a mortgage, the buyer also pays discount points if they choose to buy down the interest rate.

Costs the seller almost always pays

The seller pays the real estate agent commission, which is typically 5 to 6 percent of the sale price and is split between the buyer's agent and the seller's agent. This is the largest closing cost in most sales. The seller also pays for the title insurance policy that protects the buyer's lender — this is a one-time premium, usually 0.5 to 1 percent of the sale price.

The seller typically pays to fix any major issues the inspection found, or negotiates a credit to the buyer at closing if the buyer agrees to handle repairs themselves. The seller also pays for a real estate attorney if one is required in your state, and for any title search or title defect resolution needed to clear the title before closing.

If the seller has an outstanding mortgage, the seller's lender is paid off from the sale proceeds at closing — this is not a separate "cost" but rather money that goes to pay off the existing loan. The seller also pays any unpaid property taxes or homeowners association fees owed up to the closing date.

Costs that are negotiable or state-dependent

Property taxes, transfer taxes, and recording fees vary widely by state. Some states assign these entirely to the buyer, some to the seller, and some split them. Your real estate agent should tell you what is standard in your area before you make an offer. If you want a different arrangement, you can propose it in the contract — the seller can accept, reject, or counter.

Homeowners association transfer fees, if the property is in an HOA, are sometimes paid by the buyer and sometimes by the seller depending on local custom and what the contract says. Title search fees and title examination fees can go either way. Pest inspection or radon testing, if ordered, are usually paid by whoever ordered them, though the seller may agree to pay if the buyer requests it as a condition of the sale.

Closing or settlement fees charged by the title company are sometimes split, sometimes assigned to one party, and sometimes negotiated. Ask your lender and title company what their standard practice is, then propose what you want in the contract.

What the buyer's lender will and will not allow

If you are getting a mortgage, your lender sets rules about what the seller can pay for on your behalf. Most lenders allow the seller to contribute toward your closing costs up to a certain percentage of the home's purchase price — typically 2 to 6 percent, depending on the loan type and your down payment.

This means if you are buying a $300,000 home and your lender allows a 3 percent seller contribution, the seller can pay up to $9,000 of your closing costs. The seller cannot pay for your appraisal, inspection, or homeowners insurance — those are your responsibility. But the seller can pay for your loan origination fees, discount points, or title insurance for the lender.

If the seller's contribution exceeds the lender's limit, the excess money goes back to the seller — it does not reduce your loan amount. Ask your lender what their seller contribution limit is before you make an offer, so you know what to negotiate for.

How to negotiate closing costs in your offer

Closing costs are part of the purchase contract. Before you make an offer, decide which costs matter most to you. If you have limited cash on hand, you might ask the seller to pay for your closing costs up to your lender's limit. If you have cash but want a lower purchase price, you might offer to pay all your own closing costs in exchange for the seller reducing the price.

Your real estate agent will include a line in the contract stating who pays for each category of cost, or will note that costs are split according to local custom. The seller can accept your proposal, reject it, or counter with a different arrangement. Nothing is final until both parties sign the contract.

Keep in mind that asking the seller to pay your closing costs may make your offer less attractive if other buyers are offering to pay their own costs. In a competitive market, sellers may favor an offer with lower closing cost requests. In a slower market, sellers may be willing to cover more costs to make the sale happen.

Closing cost estimates and the Loan Estimate form

Once you have a purchase contract and a mortgage lender, the lender must provide you with a Loan Estimate within three business days. This form lists all the costs you will pay at closing, broken down by category, and shows which costs are paid to the lender, which go to third parties, and which are paid at closing.

The Loan Estimate also shows any seller credits — money the seller has agreed to contribute toward your costs. Compare the Loan Estimate to your purchase contract to make sure the costs listed match what you and the seller agreed to. If there are differences, contact your lender or real estate attorney to clarify before closing.

You will receive a second form, the Closing Disclosure, at least three business days before closing. This is the final accounting of all costs. Review it carefully and ask questions about any line items that do not match the Loan Estimate or your contract.

Frequently Asked Questions

Can I ask the seller to pay all my closing costs?

You can ask, but your lender sets a limit on how much the seller can contribute — usually 2 to 6 percent of the purchase price. If the seller agrees to pay more than that limit, the excess goes back to the seller, not toward your loan. Your lender will tell you the exact limit when you apply for the mortgage.

Who pays for the home inspection?

The buyer pays for the home inspection because the buyer orders it. The inspection is for the buyer's benefit — to learn what repairs the home needs before closing. The seller may agree to pay for the inspection if the buyer requests it, but this is not standard and must be negotiated in the contract.

What if the inspection finds major problems?

The seller does not have to fix anything. You can ask the seller to make repairs, ask for a credit at closing so you can pay for repairs yourself, or walk away if the problems are serious enough. What the seller agrees to pay for is negotiated after the inspection results come back — it is not locked into the original contract.

Do I have to pay property taxes at closing?

Property taxes are prorated at closing, meaning you and the seller split the year's taxes based on how many days each of you owned the home. Whether the buyer or seller pays the prorated amount depends on your state and what the contract says. Your title company will calculate the exact amount and show it on the Closing Disclosure.

Who pays the real estate agent commission?

The seller pays the entire commission, which is typically 5 to 6 percent of the sale price. The commission is split between the seller's agent and the buyer's agent. This cost comes out of the seller's proceeds at closing and does not affect the buyer's closing costs.