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

Closing costs in a real estate transaction refer specifically to the various fees and expenses that both the buyer and seller incur during the finalization of the sale. These costs typically include items such as title insurance, appraisal fees, inspection fees, attorney fees, and recording fees, among others. Closing costs can also encompass lender-related fees if financing is involved, but they represent a broad category of expenses that are necessary to complete the transfer of property ownership.

The total price of the property being sold is not inclusive of these costs; rather, it is the agreed-upon purchase amount between buyer and seller. While property maintenance costs are relevant to homeownership, they occur after the purchase and are not part of the transaction's closing phase. Additionally, financing charges from the mortgage lender, while they can be part of closing costs, only represent a subset of the broader range of fees and expenses associated with closing. Therefore, recognizing that closing costs encompass all these fees and expenses provides a comprehensive understanding of what they entail in a real estate transaction.