What are closing costs in a real estate transaction?

Closing costs in a real estate transaction refer to the various fees and expenses that are incurred to finalize the sale of a property. These costs are typically paid at the closing meeting, where the ownership of the property is transferred from the seller to the buyer. The correct answer encompasses a range of charges that are essential to completing the transaction.

Key components of closing costs include legal fees for the attorney who assists in the transaction, title insurance that protects the buyer and lender from title defects, and transfer taxes, which are taxes imposed by the government when the property changes ownership. These fees ensure that the sale is legally binding and that all necessary paperwork is completed, providing peace of mind to both parties involved.

While other options mention specific fees related to the sale, they do not capture the complete scope of what closing costs entail. For example, fees related to property improvements are not typically classified as closing costs, as they pertain more to renovations rather than the transaction itself. Similarly, while inspections may incur fees, they are only one component of the broader closing costs. Realtor commission fees, while significant, are also distinct from closing costs, as they are generally paid separately and do not encompass the range of charges finalized at closing.