Who Pays What in a Real Estate Transaction?
Closing day brings a long list of fees beyond the sale price, and your clients count on you to walk them through who owes what. Understanding these costs helps you set realistic expectations early and keep clients confident through to the closing table. At Kentuckiana Real Estate Academy, our courses prepare you for these conversations and help you build lasting relationships with the people you represent.
Do Sellers Pay Closing Costs?
Yes, sellers pay closing costs, and they typically pay more than buyers do. Closing costs cover the services that finalize a sale, such as title work, escrow, and recording fees, and they vary based on location, home price, and loan type.
Buyers and sellers can negotiate who covers certain costs through seller concessions. Negotiable items usually include prepaid expenses like property taxes and HOA dues, a home warranty, a credit toward a needed repair, and a portion of the buyer's closing costs.
How Can Seller Concessions Benefit Your Seller Clients?
Seller concessions can help your client close a sale when a buyer qualifies for the mortgage but doesn't have enough cash on hand for closing costs. They tend to work best in a buyer's market or when a property has sat unsold for a while, and your seller wants to sweeten the deal.
Loan type sets the limit, and the cap is calculated from the sale price, the appraised value, or whichever is lower, depending on the program. FHA and USDA loans cap seller concessions at 6% of the sale price, regardless of down payment size. Conventional loans scale with the buyer's down payment: 3% for less than 10% down, 6% for 10% to 24.99% down, and up to 9% once the buyer puts down 25% or more. VA loans work differently. The seller can cover all of the buyer's customary closing costs with no cap, plus contribute up to an additional 4% of the home's appraised value toward other concessions, like prepaid taxes or paying off a buyer's collections.
How Much Do Sellers Pay in Closing Costs?
Seller closing costs typically run 6% to 10% of the sale price. On a $350,000 home, that comes out to $21,000 to $35,000.
These costs usually include:
- Real Estate Agent Commissions
- Owner's Title Insurance
- Escrow and Settlement Fees
- Prorated Taxes
- HOA Dues
- Transfer Taxes
- Attorney Fees
- Seller Credits
How Much Do Buyers Pay in Closing Costs?
Buyers typically pay 2% to 5% of the purchase price in closing costs, in addition to their down payment. On that same $350,000 home, buyers can expect to pay $7,000 to $17,500.
Buyer closing costs usually include:
- Property Survey Fees
- Appraisal Fees
- Credit Check Fees
- Home Inspection Fees
- Real Estate Agent Commissions
- Lender's Title Insurance Premium
- Property Tax Escrow
- Real Estate Transfer Tax
- Deed Recording Fee
- Notary Fees
- Private Mortgage Insurance Premiums (PMI)
Your Role in Explaining Closing Costs to Clients
As a real estate agent, you're often your client's first source of clear, accurate information about closing costs. Walking buyers and sellers through these numbers early, before they fall in love with a price they can't fully afford, builds trust and avoids surprises later.
Encourage buyers to budget for closing costs before they start touring homes and remind sellers that commissions and other fees will reduce their net proceeds below the sale price. Working with buyers and working with sellers both come down to knowing these numbers well enough to answer client questions on the spot.
Contact Us to Begin a Career in Real Estate
If you're interested in a career in real estate that serves your community and offers financial security and flexibility, Kentuckiana Real Estate Academy can help. We offer pre-licensure courses for real estate agents and brokers, as well as continuing education classes to keep your license current. Our instructors bring real-world experience to every course.
Get started or learn more by calling (859) 317-4846 or filling out our contact form. We are proud to serve the surrounding areas of Louisville and Lexington, KY.
