HOME BUYING
From Listings to Living
Two buyers go under contract the same week, each on a $300,000 home. One is in Philadelphia, the other in Fort Lauderdale. When their Closing Disclosures arrive, the Philadelphia buyer finds a transfer tax line close to $7,000 in the buyer's column. The Florida buyer finds the state's deed tax sitting in the seller's column, because that is where the contract put it. Same price, same kind of loan, very different cash to close.
So who pays closing cost, buyer or seller? The purchase contract decides, and where it says nothing, state law and local custom fill the gap. In practice the split follows a pattern. The buyer pays the costs that come with the new loan and the buyer's new ownership: lender fees, the appraisal, the lender's title policy, prepaid interest, homeowners insurance and the first escrow deposit. The seller pays to deliver clear title: paying off the old mortgage, releasing liens, preparing the deed and paying the agents the seller hired. A middle group, mainly the owner's title policy, transfer taxes and the settlement fee, changes from state to state and sometimes county to county.
The CFPB puts it plainly in its guide to closing fees: buyers usually cover these costs, but depending on the contract or state law the seller may end up paying some of them. Freddie Mac's budgeting guide, last reviewed June 4, 2025, estimates buyer closing costs at 2 to 5 percent of the purchase price. Whether any of that can be financed, and how seller credits are capped by loan type, is covered in our guide to rolling closing costs into your mortgage. This article is about the allocation itself.
Leevli Editorial Team
The table shows where each common item usually lands when the contract follows the default pattern, and what moves it. Use it as a starting map, then check your own contract line by line.
| Cost | Usually paid by | What changes it |
|---|---|---|
| Origination charges, discount points, credit report | Buyer | A seller credit or lender credit can cover them |
| Appraisal | Buyer | An appraisal waiver can remove the fee |
| Lender's title policy | Buyer | It protects the lender on the buyer's loan; a seller credit can cover it |
| Owner's title policy | Varies by state and county | Local custom and the contract |
| Transfer or deed taxes | Varies by state | State statute, local custom and the contract |
| Settlement or escrow fee | Varies; the Texas form splits it in half | Local custom and the contract |
| Recording the deed and new mortgage | Often the buyer | Contract; the seller records releases of its own liens |
| Prepaid interest, insurance premium, escrow deposits | Buyer | A seller credit can cover them, within loan limits |
| Payoff of the seller's loans and lien releases | Seller | Nothing; the title has to be delivered clear |
| Property taxes | Prorated to the closing date | Whether taxes are paid in advance or in arrears locally |
| Real estate commissions | Set by separate written agreements | Negotiation; a seller may contribute to the buyer's agent |
| HOA estoppel, transfer and capital contribution fees | Varies | State law, the governing documents and the contract |
Two items on that list deserve their own explanation. Commission is a sale cost settled at closing, and it has changed more than anything else here since 2024; our guide to whether closing costs include realtor fees covers where it shows up and who pays it now. Association fees depend on the building, and the document that fixes them is the estoppel certificate, explained in what an estoppel is in real estate.
The buyer's costs follow the order of the Loan Estimate and the Closing Disclosure, so it helps to read them the way the forms group them.
Origination charges, discount points, the appraisal, the credit report and the lender's title policy all exist because of your loan. Points are optional and work as prepaid interest; what points on a mortgage are walks through the break-even math. If your conventional loan qualifies for an appraisal waiver, the appraisal fee may disappear entirely. The CFPB notes that you can shop for every service in Section C of page 2 of the Loan Estimate, which is where title and settlement charges usually sit.
Two buyer costs never appear as closing costs at all. The earnest money deposit is already paid and shows up as a credit toward your cash to close; see what earnest money means. The home inspection is usually paid directly to the inspector before closing, and how the house inspection fee works explains when and how.
The seller's side is shorter but larger in dollars, and most of it comes out of the sale proceeds rather than the seller's pocket.
The tax proration deserves a closer look. The Texas resale contract, for example, prorates the current year's taxes through the closing date. Where taxes are paid in arrears, the seller owes the buyer for the months already used. On an illustrative $6,000 annual tax bill and a June 30 closing, that is 181 days, or about $2,975, credited to the buyer. The seller's lower bill can also understate what the buyer will pay later, as condo property taxes explains.
The middle group of costs is where the closing cost split between buyer and seller differs most. These four states show how much the answer depends on where you buy.
| State | What the rule covers | Who pays | Source |
|---|---|---|---|
| New York | $2 per $500 of price (0.4 percent); a 1 percent mansion tax on residences at $1 million or more | Seller pays the base tax by statute; buyer pays the mansion tax; each side is liable if the other does not pay | NY Department of Taxation and Finance |
| Florida | 70 cents per $100 on deeds (60 cents plus a surtax in Miami-Dade, with the surtax waived for single-family homes) | Set by the contract, but all parties are liable to the state | Florida Department of Revenue |
| Pennsylvania (Philadelphia) | 4.578 percent combined: 3.578 percent city and 1 percent state | Usually split evenly by custom, not by law | City of Philadelphia |
| Texas | Owner's title policy and escrow fee on the promulgated resale contract | Title policy: seller or buyer, chosen by checkbox; escrow fee: half each | TREC Contract No. 20-19 |
New York's Department of Taxation and Finance says the grantor, the seller, pays the real estate transfer tax of $2 for each $500 of consideration, and the buyer pays only if the seller does not or is exempt. On an illustrative $400,000 sale, that is $1,600 from the seller. The 1 percent mansion tax on residences priced at $1 million or more falls on the buyer. Residential sales in New York City at $2 million or more carry additional state taxes on top of these. If you are buying in Brooklyn Heights or anywhere in the city, ask your attorney which of these lines apply at your price.
The Florida Department of Revenue sets documentary stamp tax on deeds at 70 cents per $100 outside Miami-Dade County. On an illustrative $450,000 sale in Fort Lauderdale, that is $3,150 on the deed. The same guidance says all parties are liable for the tax regardless of which party agrees to pay it. Your contract allocates the cost between you and the seller; it does not limit what the state can collect.
Philadelphia's Realty Transfer Tax page lists a combined rate of 4.578 percent and says the tax is usually split evenly between buyer and seller, but this is not a legal requirement, and the city can collect the full amount from either party. On an illustrative $300,000 sale, that is $13,734, or $6,867 each under the usual split. This is the line behind the first buyer's surprise in the opening example.
The Texas Real Estate Commission promulgates a standard resale contract. The current version, TREC No. 20-19, has a checkbox for whether the owner's title policy is at the seller's or the buyer's expense. It lists the seller's expenses (lien releases, deed preparation, one-half of the escrow fee) and the buyer's (loan fees, the loan title policy, recording fees, prepaids, the other half of the escrow fee). If you are buying in Houston's The Heights, that checkbox is a real negotiating point, because the form leaves it open.
These are four states out of fifty. Your own state's custom is something the title company, settlement agent or local real estate attorney can tell you in one phone call, and it is worth asking before you sign, while every line is still negotiable.
A seller concession is the seller agreeing to pay costs that would otherwise be yours. Lenders call it an interested party contribution and cap it. Fannie Mae's Selling Guide B3-4.1-02 allows 3 percent of the price when the loan-to-value ratio is above 90 percent, 6 percent from 75.01 to 90 percent, 9 percent at 75 percent or less, and 2 percent on an investment property. FHA, VA and USDA set their own limits, which our closing cost financing guide lists side by side.
Not everything the seller pays is a concession. The same Fannie Mae section says fees a seller pays in accordance with local custom are not subject to the caps, and neither is a legitimate tax proration credit where taxes are paid in arrears. So a seller in a county where custom puts the owner's title policy on the seller can pay it without eating into your 3, 6 or 9 percent.
Everything in the middle group, and much of the buyer's group, is negotiable. The tools are a seller credit, a price reduction, a lender credit and plain shopping. The CFPB notes that sellers asked for a credit typically raise the price to cover it, so the real choice is usually between a credit and a lower price.
Say you are buying a $400,000 condo in Chicago's Lincoln Park with 10 percent down, and the seller is willing to give up $8,000. The figures below are illustrative, at an assumed 6.5 percent rate on a 30-year loan:
| Option | Price | Loan | Monthly principal and interest | Effect on cash at closing |
|---|---|---|---|---|
| $8,000 seller credit | $400,000 | $360,000 | $2,275.44 | $8,000 less cash needed |
| $8,000 price reduction | $392,000 | $352,800 | $2,229.94 | $800 less down payment |
The credit saves $7,200 more cash today. The price cut saves about $45.51 a month and leaves you owing $7,200 less. If cash is what stands between you and closing, the credit wins. If you have the cash and plan to stay, the price cut lowers what you owe for as long as you keep the loan. At 90 percent loan-to-value, Fannie Mae's cap here is 6 percent, so an $8,000 credit fits, as long as it does not exceed your actual costs.
A few habits help in any market:
A lender, a settlement agent or a real estate attorney in your state should review the final allocation before you sign the contract. The people who closed in the same building recently can tell you what sellers there actually agreed to; ask them on Ask a Resident and compare buildings on Leevli's listings.
The rules are written by states and lenders, but what sellers in a particular building really pay at closing is something only recent buyers know.
Listings show the property, but they rarely explain the lived reality around it. On Leevli, a mover can explore the city, review neighborhood and building information, and ask a verified resident the specific questions that remain unanswered. That human layer helps readers know what to investigate before signing a lease, making an offer, or choosing between two addresses.
State law and local custom fill the gap. In general, the buyer pays the costs tied to the new loan, such as origination, appraisal, the lender's title policy and escrow deposits, while the seller pays to deliver clear title, including loan payoffs and lien releases. Transfer taxes and the owner's title policy depend on the state. A good contract names the payer for each item so nobody relies on custom.
There is no national split. The buyer usually carries more line items, and Freddie Mac estimates buyer closing costs at 2 to 5 percent of the purchase price. The seller carries fewer items but often larger ones, such as commissions and, in some states, transfer taxes. Tax prorations and negotiated credits then move money between the two sides on the settlement statement.
Loan costs such as origination charges, any discount points, the appraisal, the credit report and the lender's title policy, plus other costs: recording fees, any loan-related taxes, prepaid interest, the first year of homeowners insurance and the initial escrow deposit. Depending on the state, it can also include the owner's title policy and part of the transfer tax. The inspection is usually paid before closing.
Payoff of every mortgage and lien on the property, recording of the releases, deed preparation, the commission the seller agreed to pay, any contribution toward the buyer's broker, and in some states transfer taxes or the owner's title policy. Credits to the buyer, such as prorated property taxes, repair credits and agreed concessions, also reduce the seller's proceeds at closing.
It depends on the state. New York's statute puts its base transfer tax on the seller and its 1 percent mansion tax on buyers of residences at $1 million or more. In Philadelphia, the 4.578 percent combined tax is usually split evenly by custom. Florida's deed tax is allocated by contract, but the state treats all parties as liable. Check your own state's revenue department.
Local custom and the contract decide. In some areas the seller customarily buys the owner's policy for the buyer; in others the buyer pays. The Texas resale contract makes the parties check a box choosing seller's or buyer's expense. Fannie Mae does not count a fee the seller pays under local custom against its concession limits, so it does not use up your seller credit.
The seller agrees to pay part of your closing costs, and the credit appears on the Closing Disclosure. Lenders cap concessions: Fannie Mae allows 3, 6 or 9 percent of the price for a principal residence or second home, depending on loan-to-value, and 2 percent for an investment property. Fannie Mae treats any amount above your actual closing costs as a sales concession deducted from the price.
A credit helps when cash is tight, because it lowers what you bring to closing dollar for dollar. A price cut lowers the loan and the monthly payment but saves only your down payment percentage in cash. In one illustrative case, an $8,000 credit saved $7,200 more at closing than an $8,000 price cut, which saved about $45 a month instead.
Mostly in the offer and the purchase contract, before either side is committed. After that, the inspection and appraisal are the usual reopeners: a defect can justify a repair credit, and a low appraisal can force a price change. By the time the Closing Disclosure arrives, your job is to confirm that the numbers match the agreement, not to renegotiate them.
Leaving the middle group to custom without checking it. Buyers relocating from another state can assume the seller pays the transfer tax or the owner's title policy, then find it in their own column. The second mistake is negotiating a seller credit larger than the lender can use, which wastes concession money that could have reduced the price instead.
This article is informational and does not constitute legal, financial, tax or insurance advice.
