What do closing costs refer to in a real estate transaction?

Closing costs in a real estate transaction refer to the expenses associated with financing and legal processes required to finalize the sale of a property. This encompasses a variety of charges that can include loan origination fees, title insurance, appraisal fees, attorney fees, and recording fees, among others. These costs are typically paid at the closing of the transaction when ownership of the property is transferred from the seller to the buyer.

Understanding closing costs is crucial for buyers and sellers, as these expenses can significantly impact the overall cost of a real estate transaction. They are distinct from other costs, such as marketing fees, agent commissions, or property taxes. By focusing on the financing and legal aspects, closing costs ensure that the transaction is legally binding and financially managed.