What are closing costs?

Closing costs refer to the various fees and expenses that both buyers and sellers incur during the finalization of a real estate transaction, in addition to the property price itself. These costs can include items such as appraisal fees, title insurance, attorney fees, escrow fees, and other related expenses necessary to complete the sale. Understanding closing costs is crucial for both parties, as they represent an important factor in the total financial obligation involved in a property transaction.

The other choices provided do not accurately encompass the concept of closing costs. For instance, stating that fees are only paid by the seller overlooks the fact that both buyers and sellers are typically responsible for different portions of closing costs. Focusing solely on home inspections ignores the broader range of expenses that can occur during closing, while defining closing costs as a type of fine for late mortgage payments misrepresents the nature of these costs entirely. Closing costs are integral to the overall process of buying or selling real estate and understanding them is key to effective financial planning in real estate transactions.