Understanding Who Covers What Costs in a Real Estate Transaction: Buyer vs. Seller

One of the questions I hear most from both buyers and sellers is, "Who pays for what at closing?" The short answer: in California, almost everything is negotiable and is spelled out in your purchase contract. That said, there are common customs here in Southern California, and knowing them ahead of time helps you budget and avoid surprises. Costs buyers typically pay - Down payment, plus an earnest money deposit that goes into escrow and is credited at closing. - Loan costs if you are financing: lender fees such as origination or underwriting, the appraisal, and the credit report. - The lender's title insurance policy, which protects your lender. - Prepaid items: homeowners insurance for the first year, prorated property taxes, prepaid mortgage interest, and any reserves your lender requires. - Inspections you choose to order, such as a general home inspection, roof, sewer line or septic. - Recording fees for the new deed and loan documents. - HOA transfer or move-in fees in some communities. Costs sellers typically pay - Payoff of any existing mortgage or liens on the property. - Real estate commissions, as agreed in the listing agreement. Compensation for the buyer's agent is now negotiated separately and may be paid by the seller, the buyer, or a combination, depending on what is agreed. - The owner's title insurance policy, which in much of Southern California is customarily paid by the seller. - The county documentary transfer tax ($1.10 per $1,000 of the sale price in most California counties), plus any city transfer tax where it applies. - Required disclosure reports, such as the Natural Hazard Disclosure report, and HOA documents for the buyer. - Prorated property taxes and HOA dues up to the closing date. - Any repairs or credits agreed to after the buyer's inspections, and in many sales the termite (wood-destroying pest) clearance. Costs that are often shared - Escrow fees are commonly split between buyer and seller in Southern California. - Home warranty, termite work, and other items are frequently negotiated as part of the offer. A few tips - Ask for an estimated closing statement early. Your lender's Loan Estimate and your escrow officer can give buyers a good picture of cash needed to close, and I can prepare a net sheet for sellers. - Customs vary by county and even by city, so what is "normal" in Wrightwood or the High Desert may differ from Los Angeles or Orange County. - Seller credits toward a buyer's closing costs can be a useful negotiating tool. Every transaction is a little different, and this is a general overview rather than legal or tax advice. If you are thinking about buying or selling and want a clear picture of your own numbers, reach out and I will walk you through it.