What does the term "closing costs" encompass in a real estate transaction?

The term "closing costs" in a real estate transaction refers to all fees and expenses necessary to finalize the sale of a property. This includes a variety of costs such as loan origination fees, title insurance, appraisal fees, attorney fees, escrow fees, and any relevant taxes. It encompasses everything needed to complete the transaction, ensuring that ownership is legally transferred from the seller to the buyer.

This comprehensive definition is crucial for both buyers and sellers to understand, as it affects the total amount of money needed at closing and ensures that both parties are aware of their financial obligations. Additionally, knowing how these costs break down helps in negotiating and planning budgets for real estate transactions effectively.