closing costs

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Closing costs refer to a variety of fees and expenses incurred by parties in the finalization of a deal that are not part of the negotiated price. These costs usually arise in real estate transactions like buying a home. In a house sale, the buyer and seller can incur costs for applying for a loan, escrow fees, attorney fees, insurance fees, taxes, and other fees. Most fees are paid by the buyer, but sometimes sellers agree to cover some closing costs. Closing costs can be substantial in a transaction, ranging from around 2-5% of the purchase price of home sales. Large business transactions can incur a variety of similar ‘closing costs’ that must be considered in negotiating agreements, mergers, and acquisitions that include fees for inspections and management of transitions. 

[Last updated in June of 2021 by the Wex Definitions Team]