What are "closing costs" in a real estate transaction?

Closing costs in a real estate transaction encompass a variety of fees and expenditures that take place at the closing, which is the final step of the property purchase process. These costs include, but are not limited to, title insurance, appraisal fees, attorney fees, recording fees, transfer taxes, and any pre-paid property taxes or homeowners insurance. Since these expenses emerge at the closing stage of the transaction, they are critical for the buyer and seller to understand, as they can significantly impact the overall cost of the home purchase.

Other options provided focus on more specific aspects of real estate transactions. For instance, one option solely addresses costs related to home inspections, which are indeed a necessary part of the process but are only one component of the broader set of closing costs. Another option refers specifically to the commission paid to real estate agents, which is a crucial expense but not categorized as a closing cost since it is typically negotiated and paid out of the sale proceeds rather than being itemized at the closing. Lastly, deposit amounts are typically earnest money that demonstrates a buyer's intention to purchase but not considered a closing cost; they are held in escrow and may be applied to the purchase price at closing rather than a separate transaction fee. Therefore, recognizing that closing costs incorporate a