What are "closing costs" in real estate?

Closing costs in real estate refer specifically to the fees and expenses that are incurred during the closing of a real estate transaction. This stage is when ownership of the property is officially transferred from the seller to the buyer, and various financial obligations must be settled before the transaction is finalized.

The closing costs encompass a variety of charges, such as title insurance, appraisal fees, attorney fees, recording fees, and prepaid taxes or insurance. These costs are typically outlined in a document known as the Closing Disclosure, which provides a detailed itemization of all expenses associated with the transaction.

Understanding closing costs is crucial for buyers and sellers, as these fees can significantly impact the overall cost of purchasing or selling a property. Being aware of these costs helps parties involved in the transaction prepare financially and avoid surprises at the closing table.