Who Pays for What in a Real Estate Transaction? A State-by-State Guide

Understanding who pays for which fees is critical to budgeting accurately for a home sale or purchase. Sellers typically pay the majority of the transaction costs, including real estate agent commissions and owner's title insurance, while buyers cover due diligence expenses like appraisals and inspections. However, local customs and negotiation can significantly alter this standard breakdown. According to the National Association of Realtors (NAR), sellers spend an average of 8-10% of the sale price on fees, while buyers pay 2-5% in closing costs.

Who Typically Pays the Fees When Selling a House?

When selling a house, the seller's financial responsibilities are generally more substantial because they are receiving the proceeds from the sale. These costs are deducted from the final sale price at closing. Common seller-paid fees include:

• Real Estate Agent Commissions: This is often the largest single expense. The commission is typically 5-6% of the home’s sale price, which is split between the listing agent and the buyer’s agent.
• Owner’s Title Insurance: The seller usually pays for the owner’s title insurance policy. This one-time fee, which costs around 0.5%-1% of the home’s price, protects the new homeowner against future ownership claims or disputes.
• Transfer Taxes: Also known as conveyance taxes, these are state or local fees for transferring the property title from seller to buyer. The seller most often pays these, which can range from 0.1% to 2% of the sale price.
• Outstanding Bills: Sellers are responsible for prorated property taxes, HOA dues (Homeowners Association dues), and other utilities through the closing date.

Pro Tip: Based on our experience assessment, requesting a net proceeds sheet from your real estate agent early in the process provides a clear estimate of your final take-home amount after all costs.

Who Pays for Escrow Fees?

An escrow company is a neutral third party that holds funds and documents until the transaction is complete. Who pays the escrow fees is highly dependent on regional practice. For example, in California, it is customary for buyers and sellers to split the fee, while in Washington state, the buyer often covers the entire cost. These fees generally range from 1-2% of the home price. In slower markets, a seller might offer to pay the escrow fee to make their property more attractive to buyers.

Who Pays for the Home Inspection?

The home inspection is a critical step for the buyer to assess the property's condition. Therefore, the buyer almost always pays for the home inspection directly. The average cost falls between $350 and $750. Some sellers opt for a pre-listing inspection to identify and address potential issues beforehand, which can streamline negotiations.

Who Pays for the Appraisal?

The appraisal is required by the lender to ensure the property’s value supports the loan amount. Since it is a loan-related requirement, the buyer is responsible for paying the appraisal fee, which typically costs $400-$700. In some competitive situations, a seller may agree to cover this cost as a concession to facilitate the deal.

Who Pays for Title Insurance?

Two types of title insurance policies are involved in most transactions:

1. Owner’s Policy: Protects the buyer's equity in the home. This is customarily paid for by the seller.
2. Lender’s Policy: Protects the mortgage lender’s financial interest. This is typically paid for by the buyer.

The assignment of these costs is not universal. In some parts of the country, like the Northeast, sellers may pay for both policies, while in other regions, the costs are shared.

Who Pays for a Land Survey?

A land survey confirms property boundaries and is usually ordered to prevent future disputes. The buyer typically pays for the survey, with costs ranging from $300 to $1,000. A seller might choose to have a survey completed before listing to clarify property lines from the outset.

Why Would a Seller Pay a Buyer’s Closing Costs?

A seller concession is when a seller agrees to pay a portion of the buyer’s closing costs, such as loan origination fees or prepaid taxes. This is a common negotiation tactic, particularly in a buyer's market or when a home has been on the market for an extended period. While it reduces the seller's net proceeds, it can make the property more affordable for a larger pool of buyers and help close the deal faster.

**> The most predictable costs for sellers are real estate commissions and transfer taxes. The most negotiable costs are typically escrow fees and buyer concessions.

Frequently Asked Questions

Can a buyer negotiate for the seller to cover closing costs? Yes. Seller concessions are a standard part of real estate negotiations, especially when market conditions favor buyers.

Can a seller refuse to pay certain standard fees? A seller can refuse, but this may risk derailing the deal. Standard fees like agreed-upon commissions are contractual obligations.

Are seller-paid costs tax-deductible? Certain selling expenses, such as real estate commissions and qualifying home improvements made before the sale, can be used to reduce your capital gains tax liability. We recommend consulting with a qualified tax professional for advice specific to your situation.