Closing Costs in California: What Buyers and Sellers Pay
Sellers usually come in with a number in their head. It’s whatever Zillow says, or what their neighbor got, and they want to know how close we can get to that.
The part that sort of surprises people, once you get into it, is what’s sitting between that sale price and the check they deposit.
That gap between what a house is worth on paper and what the seller actually walks away with is bigger than most people expect going in.
On the seller side that gap is usually somewhere between 7 and 10 percent of the sale price when you add everything up. People know about commissions, kind of.
But it’s not just the commission, there’s escrow, title insurance, transfer taxes, prorations, whatever comes out of inspection, and if you’re carrying a mortgage during a two-to-three month escrow there’s that too. It piles up faster than most people expect.
What sellers pay at close
The commission is the biggest piece and it’s been under pressure since the NAR settlement, but in practice when both sides are represented you’re still typically looking at somewhere around 5 percent total, give or take depending on what gets negotiated. The CFPB breakdown of closing costs covers what shows up on the settlement statement from both the buyer and seller side if you want a neutral reference.
Owner’s title insurance runs around half a percent of the sale price, and the seller’s share of escrow fees on a mid-range sale is typically $1,500 to $2,000 depending on the county. Transfer taxes are $1.10 per thousand at the state level under California Revenue and Taxation Code Section 11911, and some cities add to that.
The dollar amounts on a $500,000 sale in California come out looking something like this.
| Cost Item | Estimated Amount | % of Sale Price |
|---|---|---|
| Real Estate Commission (5%) | $25,000 | 5.0% |
| Owner’s Title Insurance | $2,500 | 0.5% |
| Escrow Fees (seller share) | $1,500 | 0.3% |
| County Transfer Tax | $550 | 0.11% |
| Home Warranty (if offered) | $600 | 0.12% |
| Recording Fees | $150 | 0.03% |
| Prorations (taxes, HOA, etc.) | $500 | 0.1% |
| Total Estimated Seller Costs | $30,800 | ~6.1% |
And the same breakdown on a million-dollar sale, where the percentages are about the same but the dollar amounts get a lot more real.
| Cost Item | Estimated Amount | % of Sale Price |
|---|---|---|
| Real Estate Commission (5%) | $50,000 | 5.0% |
| Owner’s Title Insurance | $5,000 | 0.5% |
| Escrow Fees (seller share) | $2,500 | 0.25% |
| County Transfer Tax | $1,100 | 0.11% |
| Home Warranty (if offered) | $700 | 0.07% |
| Recording Fees | $150 | 0.015% |
| Prorations (taxes, HOA, etc.) | $1,000 | 0.1% |
| Total Estimated Seller Costs | $60,450 | ~6.0% |
What’s negotiable
Most of those line items are at least somewhat negotiable, that’s worth saying. Transfer taxes are set by the county and city so you can’t move those, but the escrow split and whether the seller covers the owner’s title policy are both negotiable, and they vary a fair amount depending on where in California you are.
In the Inland Empire it’s pretty common for the seller to cover the full escrow fee and the title policy, in other parts of the state those get split more evenly. Your escrow officer or agent will know what’s customary for that specific county, it varies more than people expect.
I see sellers get surprised by the city transfer tax more often than the county rate, and in Los Angeles city the city rate runs $4.50 per thousand on top of the county’s $1.10. On a $700,000 sale in LA city, a seller ends up paying about $3,920 in transfer taxes before the commission even comes into it.
Los Angeles city also added Measure ULA in 2023, which layers a 4 percent tax on residential sales above $5 million and 5.5 percent above $10 million, on top of the standard transfer taxes. I’ve had sellers in LA city zip codes who hadn’t factored that in at all, and the first time the settlement statement showed it they were doing math in the margins trying to figure out where it came from.
The inspection variable
The line item that catches people off guard most often isn’t in that table. It’s whatever comes out of the inspection, a buyer comes back with a repair request or a credit ask and the seller has to figure out whether holding firm is worth the risk of losing the deal or whether absorbing the cost is the cleaner path.
On properties with deferred maintenance that’s where a lot of selling as-is conversations start, because sellers realize they’d rather set the price to account for condition upfront than negotiate it away after inspection.
On a property that’s already priced as tightly as it can go, that negotiation can eat most of what was left. In over 400 transactions, I’ve seen sellers end up $40,000 or $50,000 below what they expected, and it wasn’t because anything went particularly wrong.
Prorations
There’s also the proration piece, which I see catch people off guard fairly often. Depending on where you are in the property tax cycle when you close, you might owe the buyer a credit for taxes that have accrued but haven’t been billed yet, or you might have overpaid and be recovering a partial refund.
It’s not a huge number but it shows up on the settlement statement and people notice it, usually while they’re already trying to make sense of everything else on that document at once.
I’ve had sellers notice the natural hazard disclosure report for the first time when the settlement statement comes back from escrow. It covers fire severity zones and other state-mapped hazard areas, and the vendor charge runs $70 to $150 on the seller’s side.
A lot of sellers I’ve worked with didn’t know it existed until the escrow officer brought it up, usually around the time the preliminary settlement statement came in.
What buyers pay in California
Buyers ask me about this side of it too, mostly people who are buying another house after they sell. The range I see most often is somewhere in the 2 to 3 percent of purchase price range.
The loan origination fee is usually the biggest piece if you’re financing, and then you’ve got the lender’s title policy, escrow fees on the buyer’s side, the appraisal, an inspection, and the prepaid items, which are things like paying the first year of homeowner’s insurance upfront and funding the escrow account for property taxes.
I see prepaid items catch buyers off guard more often than any other line item, mostly because they don’t come up in the early commission conversation. The buyer pays the first year of homeowner’s insurance upfront at close, and the lender collects two to three months of property tax payments to seed the impound account they’ll draw from when the tax bills come due.
I also have buyers ask about prepaid interest once they see it on the settlement statement. The lender charges interest from the close date through the end of the month, and on a $500,000 loan at 6.5 percent a mid-month close typically adds $700 to $900 to what the buyer brings to the table.
On a $500,000 purchase it typically comes out around $12,000 to $13,000 all in.
| Cost Item | Estimated Amount | % of Purchase Price |
|---|---|---|
| Loan Origination Fee (1%) | $5,000 | 1.0% |
| Lender’s Title Insurance | $1,200 | 0.24% |
| Escrow Fees (buyer share) | $1,500 | 0.3% |
| Appraisal Fee | $700 | 0.14% |
| Home Inspection | $500 | 0.1% |
| Prepaid Insurance (1 year) | $1,500 | 0.3% |
| Property Tax Escrow Setup | $2,000 | 0.4% |
| Total Estimated Buyer Costs | ~$12,400 | ~2.5% |
Buyers sometimes ask sellers to cover a portion of their closing costs as part of the offer, and in slower markets that kind of concession comes up pretty regularly. For the seller that’s really just a net price reduction dressed up differently, you’re taking less home so the buyer has an easier time getting to the table, and whether it makes sense kind of depends on how motivated you are to get the deal done versus hold for a better number.
Closing Costs on a Cash Sale
The buyers who ask us whether paying cash eliminates closing costs have the general idea right but tend to overshoot on how much goes away. Without a lender involved, the buyer doesn’t need to cover the origination fee or the lender’s title insurance, and whether to get a formal appraisal is the buyer’s call rather than a lender’s requirement.
In every cash close we’ve been through, the buyer is still covering the owner’s title policy and the escrow fees, and that combination on a $500,000 purchase typically comes out in the $3,500 to $5,000 range. Most of the buyers we’ve worked alongside have also ordered their own inspection, even without a lender requiring one.
On the seller’s side of a cash closing, the escrow officer is running through the same commission and transfer tax line items as any other deal, regardless of how the buyer is paying. Most of the cash deals we close fund within 3 to 5 weeks, and a seller carrying a mortgage through a standard financing timeline is paying holding costs the whole way.
Running the numbers on a real situation
Marcy Ranch Road, North Tustin
A seller had inherited a property from his aunt on Marcy Ranch Rd in North Tustin, almost 4,000 square feet on a big lot, pool, well-maintained, but the interior was dated pretty much throughout.
Multiple agents had walked through and told him he could list it at $1.79 million, with comparable sales in the mid-$2 million range for similar properties in that area.
The seller was a business owner, he didn’t have six months to manage a rehab while running his company and that was kind of the whole thing for him.
He wanted to know what the deal actually looked like when you ran the numbers. Commission at 5% on a $1.79 million list price is $89,500 before you’ve done anything else.
Then whatever it costs to get a nearly 4,000 square foot outdated house to the condition that buyers in that price range expect, which is a lot, and the carrying costs on a property worth that much while the rehab and listing period plays out.
We bought it at $1.6 million in November 2021, some complications came up during escrow that made it harder for conventional buyers to navigate but the point is that the seller ran the real math and the net wasn’t as far off the retail path as the headline prices suggested.
There’s a breakdown of the full cost of selling a house in California that gets into more of this if that’s a useful rabbit hole to go down.
Where a cash offer fits into this
A cash buyer’s offer is going to be below what the retail market would produce, and sellers deserve to hear that upfront rather than figure it out later. The seller keeps the commission, avoids post-inspection repair negotiations, and gets a timeline that’s fixed rather than subject to whatever a lender or contingency introduces.
On a property that needs significant work or has something complicated about it, you sort of wonder sometimes why more sellers don’t run the side-by-side numbers earlier in the process. A tenant situation or a title issue can close the gap between a cash number and a retail number pretty fast, and it’s not always obvious until you lay it out.
The comparison between working with an agent and selling to an investor goes into the tradeoffs in more detail if that’s the conversation you’re in.
Tax implications before you close
One thing worth having in your head before you close on any sale: if the property has appreciated significantly since you bought it, the gain itself has tax implications separate from the closing cost conversation. The IRS breakdown of the home sale exclusion covers what applies to primary residences, and talking to a CPA before you sign anything is worth the time, there are planning moves that work before close and don’t work after.
We’ve closed over 400 transactions across Riverside, San Bernardino, LA, Orange, and San Diego counties and the situations where the cash path makes the most sense tend to be the ones where the retail path looked clean on paper until it didn’t. If it would help to get a real number on your property, you can reach us at (951) 331-3844 or put in a request through the site.
If the numbers end up pointing a different direction once we’ve talked it through, that’s what I’ll tell you.
Doug Van Soest spent seven years as a certified residential appraiser starting in 2003 before co-founding SoCal Home Buyers with his wife Andrea Van Soest, CA DRE #01505854. Together they have closed over 400 transactions across Southern California.
