What are closing costs?

Closing costs refer to the various fees and expenses that must be paid during the closing of a real estate transaction. These costs typically include items such as title insurance, appraisal fees, loan origination fees, recording fees, and sometimes prepaid taxes or homeowners insurance. Closing costs are incurred by both buyers and sellers and serve to finalize the sale of the property, ensuring all legal and financial obligations are met.

Other options do not accurately define closing costs. Property maintenance costs relate to ongoing expenses for keeping a property in good condition and are not associated with the transaction process. Expenses for landscaping and renovations pertain to improvements made to a property, not the logistical and financial tasks involved in closing a sale. Additionally, stating that payments are made only by the seller at closing overlooks the fact that buyers typically have significant costs to cover as well, indicating a broader scope of who incurs closing costs in a transaction.