Who Pays Closing Costs? The Shocking Truth Every Seller Must Know

Who pays closing costs? It’s the question I get asked more than almost anything else at HomeRise, and honestly, the answer catches most people off guard. If you’re selling a home — or buying one — you’re probably bracing for a number that’s going to sting. And you’re right to worry. On a $400,000 home, closing costs can run anywhere from $20,000 to $36,000 total between both sides. That’s not pocket change. That’s a new car, a year of college tuition, or a serious down payment on your next place.

Here’s what most real estate guides won’t tell you upfront: who pays closing costs isn’t a simple answer. It depends on your state, the deal structure, how motivated each party is, and how good your negotiation skills are. I’ve watched sellers walk away with thousands more simply because they understood this stuff before sitting at the closing table — and I’ve seen others get blindsided by fees they didn’t even know existed.

So let me break down who pays closing costs the way I’d explain it to a friend who just listed their house.

Who Pays Closing Costs in a Typical Home Sale?

Both the buyer and the seller pay closing costs. That’s the short answer to who pays closing costs. But the split isn’t 50/50, and it’s not even close.

Sellers typically pay 6% to 10% of the home’s sale price in closing costs. Buyers usually pay 2% to 6%. On paper, the seller gets hit harder — but there’s a lot more going on under the surface.

The biggest line item for sellers has traditionally been the real estate agent commission. After the NAR settlement in 2024, how commissions work has shifted, but sellers still frequently pay between 5% and 6% of the sale price in combined agent fees. On a $400,000 house, that’s $20,000 to $24,000 going to agents alone. This single item dwarfs every other closing cost combined.

For buyers, the heavy hitters are the loan origination fees, appraisal, title insurance, and prepaid items like homeowners insurance and property taxes. These costs get rolled into a number your lender hands you a few days before closing called the Closing Disclosure. Read it carefully. I mean every line.

The thing is, who pays closing costs is partly tradition, partly law, and partly negotiation. And that last part? It’s where you can actually save real money.

Seller Closing Costs: What You’re Actually Paying

Understanding who pays closing costs starts with knowing the specific fees sellers face, because the total tends to surprise even people who’ve sold a house before.

Real estate agent commissions: Still the biggest expense. Even after the NAR settlement changed how buyer’s agent commissions work, sellers in most markets are still offering 2% to 3% to the buyer’s agent and paying 2.5% to 3% to their listing agent. That said, companies like HomeRise have been challenging this model for years — our flat-fee and 1% listing options can save sellers tens of thousands of dollars compared to the traditional 6% structure. I’m biased, obviously, but the math doesn’t lie.

Transfer taxes and recording fees: These vary wildly by state and sometimes by county. In Pennsylvania, for example, the transfer tax is 2% of the sale price — split between buyer and seller by default, so each side pays 1%. In Florida, it’s called a documentary stamp tax and runs about 0.70% for the seller. Some states like Oregon have no transfer tax at all. You need to look up your specific location because this can be a $4,000 to $8,000 surprise.

Title insurance (owner’s policy): In many states, the seller traditionally pays for the owner’s title policy, which protects the buyer from any title defects. This usually runs $1,000 to $3,000 depending on the purchase price and your state’s rates. Some states — like Texas — the buyer customarily pays this instead. Know your local norms.

Settlement and attorney fees: You’ll pay a few hundred to a couple thousand dollars for the closing itself. In states that require an attorney to handle the closing (like New York, New Jersey, and several others), this fee is higher. In states where a title company can handle everything, it’s lower.

Prorated property taxes: If you’ve already paid property taxes for months you won’t be living in the house, you’ll get a credit back. If you owe taxes for the period you occupied the home, those get deducted from your proceeds. The timing of your closing date matters here.

HOA payoffs and prorations: If your property has an HOA, you might owe prorated dues, transfer fees, or special assessments. I’ve seen HOA transfer fees as high as $500, which isn’t huge, but it adds up when you’re already watching every dollar.

Home warranty: Some sellers offer a home warranty to sweeten the deal. This is typically $400 to $600 and it’s completely optional. But in a competitive market, it can help get your offer accepted when you’re the seller trying to close a picky buyer.

When I add all this up for a $400,000 home sale, typical seller closing costs look like $24,000 to $36,000 — with agent commissions accounting for $20,000 or more of that total. This is exactly why I started HomeRise: to help sellers keep more of their equity by cutting that commission line item dramatically.

Buyer Closing Costs: What the Other Side Pays

Buyers have their own mountain of closing costs, and understanding who pays closing costs on the buyer’s side helps you negotiate smarter as a seller.

Loan origination fees: The lender charges 0.5% to 1% of the loan amount to process and underwrite the mortgage. On a $320,000 loan, that’s $1,600 to $3,200.

Appraisal fee: The lender requires this — typically $400 to $700. It confirms the home is worth what the buyer is paying, protecting the lender’s investment.

Home inspection: Usually $300 to $600, and it’s technically not a closing cost — buyers pay this upfront. But it’s part of the total transaction cost buyers need to budget for.

Title insurance (lender’s policy): This protects the lender, not the buyer. Required on virtually every mortgage. Costs $500 to $1,500 depending on your loan amount and state.

Prepaid items: Buyers need to prepay a chunk of homeowners insurance, property taxes, and mortgage interest at closing. This can easily be $2,000 to $5,000 and catches first-time buyers completely off guard.

Escrow deposits: Your lender will want a cushion in your escrow account. Typically two to three months of property tax and insurance payments upfront.

All told, buyer closing costs on a $400,000 purchase with 20% down run about $8,000 to $19,000. First-time buyers using FHA or VA loans sometimes get hit with additional fees — the FHA upfront mortgage insurance premium alone is 1.75% of the loan.

Can You Negotiate Who Pays Closing Costs?

Absolutely. And this is where most people leave money on the table.

Here’s what I tell sellers at HomeRise: everything in a real estate transaction is negotiable until the contract is signed. Who pays closing costs is no exception. The question is whether you have leverage, and that depends entirely on market conditions.

In a seller’s market — where you’ve got multiple offers and homes are moving fast — buyers often cover more of the closing costs. Some buyers will even offer to take on fees that are traditionally the seller’s responsibility just to win the bid. I saw this play out constantly in 2021 and 2022 when inventory was extremely tight.

In a buyer’s market, it flips. Sellers might agree to pay a portion of the buyer’s closing costs (called a seller concession or seller credit) to make the deal happen. This is basically the seller saying, “I’ll reduce what you owe at closing so you can afford to buy my house.” The FHA allows seller concessions up to 6% of the sale price. Conventional loans usually cap it at 3% to 6% depending on the buyer’s down payment.

The strategy that works best in my experience: know your numbers cold before you negotiate. If you understand exactly who pays closing costs in your specific transaction and what each line item costs, you can make targeted counter-offers instead of sweeping generalizations. “I’ll cover the title insurance owner’s policy but not the transfer tax” is a much stronger position than “I’ll throw in $5,000 toward closing costs.”

Who Pays Closing Costs by State: Key Differences

Who pays closing costs varies by state, and this trips people up because real estate is local in ways that aren’t obvious until you’re mid-transaction.

In Texas, the buyer traditionally pays for the owner’s title insurance policy — the opposite of most other states. In Florida, the convention varies by county: in Miami-Dade, the seller typically pays for owner’s title insurance, but in many other Florida counties, the buyer pays.

Transfer taxes are a patchwork. States like Missouri and Mississippi don’t charge them at all. New York charges one of the highest rates in the country — and if you’re selling a property over $1 million in the city, there’s an additional “mansion tax.”

Attorney requirements also affect who pays closing costs and how much. In roughly 22 states, an attorney must be involved in the closing process. This adds a cost that doesn’t exist in states where title companies handle the entire transaction.

My advice: don’t rely on general articles about who pays closing costs (including this one) for the exact numbers. Get a net sheet from your real estate agent or title company early in the process — ideally before you even list. A net sheet shows you, line by line, what you’ll actually walk away with after all fees. At HomeRise, we provide this upfront so sellers know exactly what to expect before they commit.

How to Reduce Your Closing Costs as a Seller

Now that you understand who pays closing costs and what those fees look like, let’s talk about how to actually reduce them. I’ve spent years working on this problem because traditional commission structures eat sellers alive.

Use a flat-fee or discount brokerage: This is the single biggest lever you can pull. If a traditional agent charges 6% total commission and you switch to a flat-fee service like HomeRise, you could save $12,000 to $20,000 on a $400,000 sale. I run this company, so take my bias into account — but shop around and compare your options. The savings are real regardless of which provider you choose.

Negotiate the buyer’s agent commission: Post-NAR settlement, sellers are no longer required to offer compensation to the buyer’s agent through the MLS. You can offer 0%, 1%, 2%, or whatever you think is appropriate for your market. Some sellers are experimenting with lower offers and seeing how the market responds. This is still evolving, so keep an eye on local trends.

Shop title and settlement providers: You’re not locked into using whoever your agent recommends. Get quotes from multiple title companies or attorneys. The difference can be $500 to $1,500 — not life-changing, but not nothing either.

Time your closing date strategically: Closing at the end of the month reduces the number of days of prorated interest you owe. Closing at the end of the tax year can also impact your property tax prorations. It’s a small optimization, but when you’re trying to maximize proceeds, every bit helps.

Ask your buyer to cover their own costs: In a strong market, push back on buyer requests for closing cost credits. If your home is priced right and demand is high, buyers should be covering their own transaction expenses.

Who Pays Closing Costs for Cash Buyers?

Who pays closing costs in a cash transaction? Cash deals simplify things — but they don’t eliminate closing costs entirely.

When a cash buyer purchases your home, there’s no lender involved. That means no loan origination fee, no appraisal requirement (though smart cash buyers get one anyway), no mortgage insurance, and no lender’s title policy. This can shave $3,000 to $7,000 off the buyer’s closing costs.

But who pays closing costs on the seller side? Not much changes. You still pay agent commissions (if you’re using agents), transfer taxes, your share of title insurance, and settlement fees. A cash deal might close faster — sometimes in two weeks instead of 30 to 45 days — but the seller’s closing cost structure stays roughly the same.

One thing cash buyers sometimes try: asking for a discount because they’re “saving you time and hassle.” That’s a negotiation tactic, and whether it works depends on your situation. If you need to close fast, the speed premium might be worth a small price reduction. If you’re not in a rush, don’t give money away just because someone flashes cash.

Who Pays Closing Costs on New Construction?

The question of who pays closing costs gets more complicated with new construction, which throws an extra curveball into the mix. Builders often have their own preferred title companies and lenders, and they sometimes offer closing cost incentives — but those “incentives” aren’t always as generous as they look.

Builders frequently offer to pay $5,000 to $15,000 toward buyer closing costs if the buyer uses the builder’s preferred lender and title company. Sounds great, right? But the builder’s preferred lender sometimes charges a higher interest rate or fees that offset the closing cost credit. Always get an independent quote to compare.

Who pays closing costs on new construction follows the same general rules — the seller (builder) pays their commissions and transfer taxes, the buyer pays loan-related costs and prepaids. But the dynamics of negotiation are different because builders have lawyers who wrote the contract template, and those contracts tend to favor the builder. Read it carefully, and don’t be afraid to push back.

Common Closing Cost Mistakes That Cost Sellers Thousands

I’ve watched these mistakes happen hundreds of times, and every one of them comes down to not understanding who pays closing costs before the deal gets too far along.

Not reading the closing disclosure is the biggest one. The closing disclosure arrives three business days before your closing date, and it shows every single fee in granular detail. Compare it line by line against the estimates you received earlier. I’ve seen title companies add junk fees that weren’t in the original estimate — “courier fees,” “document preparation fees,” “wire fees” — that total $500 or more. Challenge anything you didn’t agree to.

The second mistake people make when figuring out who pays closing costs: accepting the first commission rate offered. According to NAR research, commission rates vary significantly and are always negotiable. Don’t just accept 6% as gospel. The market is shifting, and sellers have more options than ever.

Third: not getting a net sheet before listing. If you don’t know who pays closing costs and how much they’ll be in your specific situation, you can’t price your home correctly. You might list too low and not have enough proceeds to cover your mortgage payoff plus closing costs. I’ve seen deals fall apart because sellers didn’t do this math upfront.

Frequently Asked Questions About Who Pays Closing Costs

Who pays closing costs in a typical real estate transaction?

Both the buyer and seller pay closing costs, but the split isn’t even. Sellers typically pay 6% to 10% of the sale price (mostly agent commissions), while buyers pay 2% to 6% (mostly lender fees and prepaids). The exact breakdown depends on your state, the contract terms, and what you negotiate. There’s no law that says one side has to pay specific costs — it’s all negotiable until you sign.

Can the seller ask the buyer to pay all closing costs?

Technically, yes — you can ask for anything in a real estate negotiation. But practically, it’s hard to make this work unless you’re in an extremely hot seller’s market. Most buyers have limited cash for their down payment and closing costs combined, so asking them to absorb the seller’s costs too would require them to bring significantly more money to the table. A better strategy is to negotiate specific line items rather than trying to shift the entire burden.

How much are closing costs on a $300,000 house?

For the seller, expect $18,000 to $30,000 — with the lion’s share being agent commissions (typically $15,000 to $18,000 at the traditional 5-6% rate). For the buyer, expect $6,000 to $18,000 depending on their loan type and how much needs to go into escrow. The total transaction cost for both sides combined runs $24,000 to $48,000, which is exactly why understanding who pays closing costs matters so much — and why negotiating who pays closing costs should be part of every offer strategy.

Are closing costs tax deductible?

Some are, some aren’t. Sellers can typically add certain closing costs (like agent commissions and transfer taxes) to their cost basis, which reduces capital gains tax when applicable. Buyers can deduct mortgage interest and property taxes paid at closing if they itemize deductions. But things like title insurance, appraisals, and recording fees generally aren’t deductible. Talk to a tax professional — not your real estate agent — about your specific situation. This isn’t tax advice, and the IRS has detailed guidelines on what qualifies.

Do closing costs change based on the type of mortgage?

Yes, and this changes who pays closing costs in practice. FHA loans come with an upfront mortgage insurance premium of 1.75% of the loan amount — that’s $5,600 on a $320,000 loan. VA loans charge a funding fee of 1.25% to 3.3% depending on your circumstances, though this can be rolled into the loan. Conventional loans don’t have these extra fees, but they might require private mortgage insurance if your down payment is under 20%. The mortgage type affects the buyer’s costs directly and can indirectly impact the seller through negotiation — a buyer with higher closing costs might ask the seller to contribute more.

Who pays closing costs in a for-sale-by-owner (FSBO) transaction?

In a FSBO sale, the seller saves on the listing agent commission — which is typically the largest closing cost. But you might still offer compensation to a buyer’s agent if their buyer is represented. Beyond commissions, the closing cost structure is basically the same: sellers pay transfer taxes, their portion of title insurance, and settlement fees. Buyers pay lender fees and prepaids. The big difference is you’re keeping an extra 2.5% to 3% by not paying a listing agent, which on a $400,000 home means $10,000 to $12,000 more in your pocket. That’s the math that drove me to build HomeRise in the first place.

The Bottom Line on Who Pays Closing Costs

Who pays closing costs isn’t a mystery once you break it down — but it is a place where uninformed sellers lose tens of thousands of dollars. The biggest expense by far is the agent commission, and that’s the one you have the most control over.

My recommendation: get a detailed net sheet before you list so you know exactly who pays closing costs in your deal, use a service that keeps your commission costs low, and don’t be afraid to negotiate every line item at the closing table. The money you save on closing costs goes directly into your pocket. That’s not theoretical savings on a spreadsheet — that’s real cash you can use for your next down payment, your kids’ education, or just living your life without that financial stress.

If you want to see what your net proceeds would look like with a flat-fee listing, check out HomeRise. We built the whole platform around the idea that sellers shouldn’t lose 6% of their home’s value just to sell it.