What Makes Up Closing/Settlement Costs in Real Estate?

Dear Buyers and Sellers:

Many of you wonder what makes up the closing /settlement costs to your real estate transaction.  It varies based on the complexity of the transaction, but I generally let a buyer know to expect approximately 3% of the transaction price and a seller should expect 8-9%.   Here are the general items:

Buyer’s Closing Costs

  • Half of the escrow fees for the transaction
  • Document prep fees
  • Recording and notary fees
  • Title search and title policy for the lender
  • Loan fees
  • Inspection fee
  • Appraisal fees
  • Credit report fees
  • Prorated property taxes
  • Prorated utilities (electricity, gas, water, cable, etc)

Seller’s Closing Costs:

  • Brokerage commission
  • Half of escrow fee for the transaction
  • Document prep fees
  • Recording and notary fees
  • Title search and title insurance for the buyer
  • Excise tax (Washington is 1.78% of sales price)
  • Local transfer tax, if any
  • State taxes, if any
  • Repairs as a result of inspection items
  • Prorated property taxes
  • Prorated utility expenses (electricity, gas, water, cable, etc)
  • Prorated mortgage payments for current month during closing

Escrow prepares the closing documents for both the buyer and the seller.  The loan documents are usually the last item to arrive prior to preparing the settlement statements for both buyer and seller.  Once the buyers and sellers have signed the settlement statements, the escrow agent awaits the funding of the loan.  At that time, the deed can be recorded on title and the transaction is officially “closed”.  I hope that clears up the mystique of the settlement statement.  Each transaction is different; these are the general norms for both buyers and sellers.


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