What are Closing Costs and Who Pays for Them?

by David Thomas

What Are Closing Costs — And Who Pays Them in Arizona?

By David Thomas, Realtor | Greater Phoenix Metro Area

If you're buying or selling a home in the greater Phoenix metro area — whether in Phoenix, Scottsdale, Gilbert, Chandler, Mesa, or Queen Creek — you’ve probably asked:

“What exactly are closing costs… and who pays them?”

It’s a great question. And understanding this upfront prevents surprises later.

Let’s break it down clearly.

What Are Closing Costs?

Closing costs are the fees and expenses required to complete a real estate transaction. They’re paid at closing — when ownership officially transfers from seller to buyer.

They are separate from:

The down payment
Earnest money
Real estate commissions

Think of closing costs as the “transaction expenses” to finalize the deal.

Buyer Closing Costs in Arizona

For buyers, closing costs typically range from 2%–5% of the purchase price, depending on financing and loan type.

Common buyer costs include:

✔ Loan origination fees
✔ Appraisal fee
✔ Credit report
✔ Lender underwriting fees
✔ Title insurance (lender’s policy)
✔ Escrow fees
✔ Prepaid property taxes
✔ Homeowners insurance
✔ Recording fees

If you're financing, prepaid items (like taxes and insurance) can make up a large portion of your closing costs.

Seller Closing Costs in Arizona

For sellers, closing costs are different — and usually higher because they include commissions.

Seller costs typically include:

✔ Real estate commissions
✔ Owner’s title insurance policy (customary in Arizona)
✔ Escrow fees
✔ HOA transfer fees (if applicable)
✔ Prorated property taxes
✔ Recording fees

In Arizona, it is customary for the seller to pay for the owner’s title policy and the buyer to pay for the lender’s title policy — but like many things in real estate, this can be negotiated.

Can Closing Costs Be Negotiated?

Yes.

In today’s market, it’s common for buyers to request seller concessions to help cover part of their closing costs — especially if the home has been on the market for a while.

In more competitive situations, sellers may receive offers with fewer concessions.

Everything is negotiable. It just depends on market conditions.

A Real-World Example

Let’s say you’re buying a $500,000 home in Gilbert.

You might expect:

Down payment (varies by loan)
Closing costs around $10,000–$20,000 depending on financing
Potential seller concessions negotiated in your favor

This is why I always tell buyers:
Don’t just budget for the down payment — budget for closing costs too.

The Biggest Misunderstanding

Many people think closing costs are one flat fee.

They’re not.

They vary based on:

Loan type
Purchase price
Negotiations
Property taxes
Insurance rates

That’s why reviewing your Loan Estimate and Settlement Statement carefully is critical.

My Advice as a Phoenix Metro Realtor

After 35+ years in real estate — over 25 right here in the Valley — I’ve learned this:

The smoothest closings happen when clients understand the numbers from day one.

Before you make an offer, we should already know:

Your estimated closing costs
Whether we’ll ask for seller concessions
What your total cash-to-close looks like

There should be no surprises at the closing table.

If you’re thinking about buying or selling anywhere in the greater Phoenix metro area, I’m happy to walk you through the numbers so you know exactly what to expect.

Because clarity creates confidence.