California Closing Costs: How They Work & Who Pays

California Closing Costs: How they Work and Who Pays

After the first few parts of buying a home, you reach the closing stage. Congratulations are due.

Even though you’re close to finishing the transaction, the closing stage shouldn’t be taken lightly. This is the finale before the keys and home are yours. However, closing will bring certain costs for buyers and sellers that should be understood and factored in. 

Sellers usually cover most of the closing costs, but buyers have to pay a percentage too. On both sides of the deal, the buyer and seller must understand the closing costs they are responsible for. 

Now we’ll explain how closing costs work and what buyers and sellers can expect.

Closing costs are important for both buyer and seller to know - Photo via Canva

California Closing Costs for Buyers and Sellers

Buyers usually pay for the closing costs out of their own pockets, while sellers can simply take the costs from their sale proceeds.

  • California homebuyers should generally set aside 1% of the total purchase price to prepare for closing costs. 
  • California home sellers should ballpark around 5%-6% for closing costs, though this will usually not be paid out of pocket. If the seller doesn’t owe more than their property is valued at, these costs can come from the sale proceeds.

In some cases, your closing costs could be much higher or slightly lower than these figures. You can get an estimate from a realtor for a more accurate picture of closing costs. 

General cost estimates of closing costs - Photo via Canva

Here’s what California closing costs look like with recent home prices:

In April 2024, the median sold price in California sat at $904,210 (according to NAR data). If we use 5% as a rough estimate of closing costs, that’s just over $45,000. 

All over California, the final closing costs could be more or less depending on where you live. In the Bay Area, with a much higher median sold price of $1,444,000 in April 2024, you could expect closing costs to be closer to $72,000. As you can see, home sale prices directly influence closing costs.

Breaking Down Closing Costs: What Are You Paying For?

It’s natural to wonder what closing costs are made up of and what you are paying for. Those are both great questions.

Buyers and sellers have different costs, so we’ll cover both perspectives, starting with homebuyer closing costs. Expect these costs to vary from county to county. Some of them, like the real estate commissions, are negotiable. 

When are closing costs paid?

While some choose to pay closing costs at each step of the process, most transfer the payment at the close of escrow.

Understand buyer and seller closing costs in California - Photo via Canva

Homebuyer Closing Costs in California

The homebuyer fees fall into a few main categories:

  • Mortgage origination fee: This is the cost for establishing your loan and it varies greatly sometimes from lender to lender.
  • Mortgage application fee: This is the cost of processing your mortgage application.
  • Mortgage points: This gives you the option to pay and lower the interest rate.
  • Home appraisal fee: This is the cost lenders often charge to confirm a property’s worth.
  • Inspection fee: This is the cost to ensure homes don’t have issues or unseen damage.
  • Title fees: These fees pay for things like a title search and insurance.
  • Property taxes: These taxes are prepaid property taxes, usually for a half or full year.

Wondering how much buyer closing costs will be? Here are some estimates of buyer closing costs in California:

Buyer Closing Cost

Rough Estimate of Cost

Loan Application Fee

Up to $500

Loan Origination Fee

Between 0.5% - 1.5% of the mortgage’s total value

Home Appraisal Fee

Between $300 and $500

Real Estate Attorney

Between $150 and $500 hourly

Courier Fee

Up to $50

Credit Report Fee

Between $10 and $100

Title Search Fee

Between $80 and $200

Title Insurance Fee

Costs can vary across California

Discount Points

~1% of the total mortgage value

Escrow Funds

Minimum 2 months of mortgage payments

Transfer Tax

0.11% of the home’s purchase price

Home Inspection Fee

Between $300 and $500

Home Owners Insurance

$1,300 annually

Recording Fee

Between $120 and $150

Home Seller Closing Costs in California

California home seller closing costs can be divided into several main categories:

  • Real estate commission: These are the real estate agent’s fees for facilitating the transaction. 
  • Escrow costs: The company you use to escrow will charge a fee for their services.
  • Title insurance fees: If there are issues with your title, this insurance covers legal costs.
  • Transfer taxes (county/city): These taxes pay for the transfer of ownership.
  • Property taxes: The seller pays property taxes to the closing date.
  • Mortgage payoff: Many sellers must pay off their mortgage at the time of the sale.
  • HOA fees: These Homeowners association fees apply to sellers with homes in HOAs.
  • Wire transfer fees: Banks charge this fee to transfer funds to pay the mortgage.
  • Reconveyance recording fees: This fee pays for the city or county to record the transaction.

How much are seller closing costs in California? We’ll answer that with some estimates, but know that different communities and service providers will cause costs to vary.

Seller Closing Cost

Rough Estimate of Cost

Real Estate Commission

Around 5% - 5.5% but sometimes negotiable

Escrow

Around 1% - 2%

Title Insurance Fees

Varies

Transfer Taxes

County Transfer Taxes: $0.55 per $500   

City Transfer Taxes: Varies

Property Taxes

Varies

Mortgage Payoff

Varies

HOA Fees

Can be up to and above $800

Wire Transfer Fees

Varies

Reconveyance Recording Fees

Usually less than $100

A realtor can walk you through these fees one-on-one with a phone call or email. 

Get in touch with The Jamison Team to experience one of California's most successful real estate agencies. The process of buying or selling a home can be complicated. However, talking it through with a realtor who’s completed the process for hundreds of clients brings clarity. 

More Questions? Follow-up With Us!

If you have more questions about what to expect from the markets around the Bay Area, don’t be afraid to reach out to us today. Our experts are experienced in all property types and the entire San Francisco Bay Area, and we can help you to find what you need to know today.

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