Closing and costs, step by step

Closing is where a lot of for-sale-by-owner sellers expect chaos and find, instead, that professionals do most of the work. Your job is to understand the sequence, watch a few key numbers, and show up to sign.

Who runs the closing

In most of the country, a title or escrow company acts as the neutral party. They hold the earnest money, search the title to confirm you can sell free of liens, prepare the settlement statement, collect and disburse the money, and record the deed with the county.

In about a dozen states, a real estate attorney handles all or part of that instead, and in several more it is simply the custom. Your state guide tells you which applies. Either way, you are not doing this alone, and you are not the one drafting the legal documents. To gather your side in order, see the documents your country requires, stage by stage.

The timeline from contract to keys

From signed contract to keys, a typical closing runs through eight stages. Escrow opens when the signed contract and the earnest money go to the title or escrow company, or the attorney; a title search confirms you can sell free of liens; the buyer inspects and either accepts, negotiates, or walks under their contingency; the lender orders an appraisal if the purchase is financed; underwriting verifies everything and clears the loan to close; the buyer’s lender delivers the Closing Disclosure at least three business days before closing; the buyer does a final walkthrough; and then everyone signs, the money funds, the deed records, and the keys change hands.

The three-day rule worth knowing

A buyer using a mortgage receives a Closing Disclosure, a five-page form with the final loan terms and costs, at least three business days before closing. That window is not a formality. It exists so the buyer can compare the final numbers to the standardized Loan Estimate they got when they applied and challenge anything that moved. If you are buying, read both documents side by side.

Protect your money from wire fraud

Wire fraud is the single largest money risk at a closing: the FBI’s Internet Crime Complaint Center logged more than $275 million in real estate fraud losses across 12,368 complaints in 2025, up from more than $173 million in 2024. The mechanics are simple. A criminal gets into an email account on the deal, often weeks ahead, reads the thread quietly, then sends fake updated wiring instructions just before closing. The money goes to the wrong account, and it is hard to claw back.

What a seller pays at closing

A seller’s closing costs come out of the sale proceeds at the table rather than as a bill paid up front. Out of your proceeds, expect some mix of these, depending on local custom and your contract:

• Title and escrow or settlement fees
• The owner’s title insurance policy, where custom puts it on the seller
• Transfer or recording taxes, where your state or city charges them
• Prorated property taxes and HOA dues up to the closing date
• Your remaining mortgage payoff
• Any concession you agreed to give the buyer, and an attorney where one is used

What a buyer pays at closing

A buyer’s costs cluster around the loan and the transfer:

• Lender and loan origination fees
• The lender’s title insurance policy, and often the owner’s where custom puts it on the buyer
• Prepaid interest, and the taxes and insurance that fund the escrow account
• Recording fees, and the inspection and appraisal already paid along the way

The lender’s title insurance policy a buyer pays for protects the lender’s interest, not the buyer’s equity. Most lenders require it. An owner’s policy is optional and is the one that covers the buyer if an old lien, a forged deed, or a missed heir surfaces later. Both are a one-time premium paid at closing, not a recurring bill.

What it actually costs, in dollars

Total closing costs typically run 2% to 5% of the purchase price, per the Consumer Financial Protection Bureau. Exact numbers turn on your price, your loan, and local custom, but these typical ranges help a buyer size the cash needed and help a seller estimate what comes out of the proceeds.

• Total closing costs: on a 2022 home purchase, the median borrower paid nearly $6,000 in closing costs and fees, per the CFPB.
• The appraisal, ordered by the lender and paid by the buyer, runs about $300 to $500 for a single-family home, with FHA, VA, and USDA appraisals sometimes running $400 to $900.
• The home inspection, usually paid by the buyer, runs about $300 to $500 for a standard single-family home.
• Title insurance is a one-time premium, roughly 0.5% to 1% of the purchase price.

These costs are not fixed, and they have been climbing. The CFPB found that median total loan costs on home purchases rose more than 36% from 2021 to 2023, which is exactly why the three-day Closing Disclosure window matters. It is your chance to read the fees line by line and question anything that moved. To put your own price and loan into the math, use the calculators below.

Taxes on your sale, in plain terms

Sellers often worry that a big chunk of the sale price goes to the IRS. For most ordinary home sales, it does not. Under IRS Section 121, if you owned and used the home as your main residence for at least two of the last five years, you can exclude up to $250,000 of gain if you are single, or up to $500,000 if you are married filing jointly. You generally cannot use the exclusion if you already claimed it on another home in the prior two years.

The number that matters is gain, not the sale price. Gain is your sale price minus your basis, which is what you paid plus the cost of improvements. Because the exclusion is so large and it applies to gain rather than the full price, many sellers owe nothing at all.

At the closing table you will likely be handed a Section 121 certification to sign. The settlement agent, usually the title or escrow company or closing attorney, reports a sale’s gross proceeds to the IRS on Form 1099-S. On a principal-residence sale where your entire gain is excludable, a written certification you sign under penalties of perjury can keep a 1099-S from being issued. Sign it only if it is true. If any of the gain is taxable, the form gets filed and you report the sale on your return.

Sources used on this page

Every legal, tax, and process claim on this page traces to one of these. We re-check them on a schedule and date the page when anything changes.

1. Closing on your new homeConsumer Financial Protection Bureau · consumerfinance.gov
2. What is a Closing Disclosure?Consumer Financial Protection Bureau · consumerfinance.gov
3. What is a Loan Estimate?Consumer Financial Protection Bureau · consumerfinance.gov
4. What is lender's title insurance?Consumer Financial Protection Bureau · consumerfinance.gov
5. CFPB launches inquiry into junk fees in mortgage closing costsConsumer Financial Protection Bureau · consumerfinance.gov
6. Topic No. 701, Sale of your homeInternal Revenue Service · irs.gov
7. Instructions for Form 1099-S, Proceeds from Real Estate TransactionsInternal Revenue Service · irs.gov
8. Business Email CompromiseFederal Bureau of Investigation · fbi.gov
9. Internet Crime Complaint Center (report fraud)FBI Internet Crime Complaint Center (IC3) · ic3.gov

Common questions

How long does closing take from accepted offer to keys?

A financed purchase commonly runs thirty to forty-five days, set mostly by the lender's underwriting. A cash deal can close in a couple of weeks because there is no loan to process. Title work, the inspection period, and the appraisal fill the rest of the calendar.

What is a Closing Disclosure and when do I get it?

It is a five-page form that lays out the final loan terms and costs for a buyer using a mortgage. By law the lender must deliver it at least three business days before closing, so you have time to compare it to your Loan Estimate and question anything that changed.

Can my closing costs change at the last minute?

Some can, but the rules limit surprise increases on a financed purchase, and the three-day Closing Disclosure window exists so you can catch changes before you sign. Compare the Closing Disclosure to the Loan Estimate line by line.

How do I avoid wire fraud when I send or receive money at closing?

Wire fraud is the biggest money risk at a closing, and it is the one part of the process you control. Scammers break into an email account on the deal, watch the thread for weeks, then send realistic-looking updated wiring instructions right before closing. The fix is a phone call. Before you wire a dollar, call your title or escrow company or closing attorney at a number you found yourself, not one from the email, and confirm the bank name, account number, and routing number out loud. Treat any last-minute change to wiring instructions as fraud until you verify it by phone. The FBI's Internet Crime Complaint Center logged more than $275 million in real estate fraud losses across 12,368 complaints in 2025, and recovery gets harder by the hour, so if a wire goes to the wrong account, call your bank immediately and file a report at ic3.gov.

Will I owe taxes when I sell my home?

Often you will not. Under IRS Section 121, if you owned and lived in the home as your main residence for at least two of the last five years, you can exclude up to $250,000 of gain if you are single, or up to $500,000 if you are married filing jointly. Gain is your sale price minus what you paid plus improvements, not the full sale price, so many ordinary sellers owe little or nothing. You generally cannot use the exclusion if you already claimed it on another home in the past two years. This is general information, not tax advice; confirm your own situation with a tax professional or IRS Topic 701.

What is the 1099-S form the title company asks me to sign, and can I avoid it?

Form 1099-S reports your sale's gross proceeds to the IRS, and the settlement agent, usually the title or escrow company or closing attorney, is the one who files it. On a principal-residence sale, you can avoid having a 1099-S issued by giving the closing agent a written certification, signed under penalties of perjury, that your entire gain is excludable under Section 121. The closing agent will hand you this certification to sign at the table. Only sign it if it is true; if any gain is taxable, the form gets filed and you report the sale on your return.

Is owner's title insurance worth buying if I am the buyer?

The lender's title insurance policy you pay for at closing protects the lender, not you. It does nothing for your equity if someone later surfaces an old lien, a forged deed, or a missed heir with a claim on the property. An owner's title insurance policy is optional and covers your stake, and it is a one-time premium paid at closing, not a recurring bill, typically in the range of 0.5% to 1% of the purchase price. The CFPB recommends weighing it precisely because the lender's policy leaves your equity exposed.