Who Pays Closing Costs: the Buyer or the Seller?

Closing costs are one of the least understood topics in the home buying process. The question of who pays them is reasonable, because the answer is: both parties, but in different amounts and for different items, and with room to negotiate how the split is structured.

Here is a clear breakdown of which costs typically fall to each side of the transaction in California, what is negotiable, and how seller-paid concessions work as a deal lever.

What Closing Costs Actually Are

Closing costs are the fees and charges required to complete a real estate transaction, paid at or before the close of escrow. They are separate from the down payment and from any earnest money deposit. They cover services rendered by lenders, title companies, escrow holders, government entities, and other parties involved in the transfer of ownership.

In California, total closing costs for a buyer typically run between 1% and 3% of the purchase price, excluding prepaids. On a $900,000 home, that is $9,000 to $27,000 due at closing in addition to the down payment.

What Buyers Typically Pay

Buyer-side closing costs are driven primarily by the loan. The largest items are:

• Loan origination fee: charged by the lender for processing the mortgage, typically 0.5% to 1% of the loan amount. On an $800,000 loan, that is $4,000 to $8,000.

• Appraisal fee: required by the lender to verify the property value supports the loan amount. Usually $500 to $1,000 for a standard single-family home.

• Credit report fee: a small administrative charge, typically $30 to $75.

• Title insurance, lender's policy: required by virtually every mortgage lender. Premiums are based on loan amount and vary by title company.

• Escrow fee, buyer's share: in California, the escrow fee is typically split between buyer and seller. The buyer's share usually runs $750 to $2,000 depending on purchase price.

• Recording fees: paid to the county to record the deed and deed of trust. Usually a few hundred dollars.

• Prepaid items: homeowners insurance, property taxes, and prepaid interest. These are the largest source of first-time buyer confusion and are covered in detail separately.

On an all-in basis, a buyer's closing costs including prepaids on a $900,000 California home with a conforming jumbo loan typically land between $18,000 and $28,000.

What Sellers Typically Pay

Seller-side closing costs are driven primarily by agent commissions and transfer taxes. The major items are:

• Real estate commission: post-NAR settlement, commission structures vary. Sellers typically pay their listing agent's commission; buyer agent compensation is now negotiated separately. Total commission is commonly 2% to 5% of the sale price depending on the agreement.

• California documentary transfer tax: assessed at $1.10 per $1,000 of sale price at the county level. On a $900,000 sale, that is $990. Some cities add their own transfer tax on top. San Francisco, for example, charges a substantially higher city transfer tax. San Diego, Santa Clara, and Orange County cities vary.

• Title insurance, owner's policy: in California, it is customary for the seller to pay for the buyer's owner's title insurance policy. This one-time premium typically runs $1,500 to $4,000 based on purchase price.

• Escrow fee, seller's share: the seller's portion of the escrow company fee, typically equal to the buyer's share.

• HOA transfer fees and document fees: if the property is in an HOA, the seller typically covers transfer fees and the cost of providing HOA documents to the buyer.

• Natural Hazard Disclosure report: a minor cost, usually $100 to $200, typically paid by the seller.

Total seller-side closing costs, excluding commission, usually run 0.5% to 1% of the sale price in California.

What Is Negotiable

Most closing costs are driven by third-party fees and government charges, which means there is limited room to negotiate them directly. What is negotiable is which party pays them, and how those obligations are structured in the purchase contract.

Customary splits vary by county in California. In San Diego and Orange County, the seller paying for the owner's title policy and splitting escrow fees is standard. In Northern California counties including Santa Clara, it is more common for the buyer to pay for their own owner's policy. Local custom is not law. It is a starting point for negotiation.

How Seller Concessions Work as a Deal Lever

A seller concession is an agreement by the seller to pay a portion of the buyer's closing costs. This is negotiated as part of the purchase offer and reduces the net proceeds the seller receives at close. From the buyer's perspective, it reduces the cash required at closing.

Seller concessions are subject to lender limits. Conventional loans cap seller contributions at 3% of the purchase price for down payments below 10%, and up to 6% for down payments of 10% to 25%. FHA loans cap seller contributions at 6%. These limits prevent sellers from artificially inflating the purchase price to fund buyer costs.

In practice, seller concessions are most commonly used in slower markets where sellers need to attract buyers, on properties that have sat without offers, and in transactions where the buyer has strong income but limited liquid assets. In competitive Silicon Valley and coastal OC markets, asking for seller concessions can weaken an offer. In slower inland markets, they are a standard negotiating tool.

The mechanics: the buyer requests a concession of a specific dollar amount in the offer. If the seller agrees, the concession appears on the closing disclosure as a seller credit applied against buyer closing costs. The buyer pays less cash at closing; the seller receives less net proceeds.

How to Think About Closing Costs in Your Offer Strategy

Buyers who understand the full closing cost picture before submitting an offer are better positioned to negotiate. A buyer who shows up to closing surprised by a $22,000 cash requirement on what they thought was a $15,000 cost has made a planning error that could have been avoided.

Run the numbers before you offer. Understand what your lender is charging, what escrow and title will cost in your county, and what your prepaids will look like based on your loan amount and property tax rate. That complete picture is the starting point for deciding whether a seller concession makes sense to request and how to structure it.

Use the Hauser Closing Costs Calculator to see your full buyer-side estimate broken out by category.