Closing Costs

What It Means

Closing costs are the transaction fees and expenses incurred when finalizing a real estate purchase, paid at settlement in addition to the Down Payment. They often range from 2% to 5% of the purchase price and include lender fees (origination, underwriting, credit report), third-party fees (appraisal, title search, title insurance, survey), government fees (recording, transfer taxes), and prepaid items (homeowners insurance, property tax reserves, prepaid interest).

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In a co-buying arrangement, closing costs are a component of the total Cash to Close and must be allocated across co-buyers — either proportionally to ownership percentage, equally, or by another agreed method.

How Closing Costs Work for Co-buyers

The lender provides a Loan Estimate early in the process and a final Closing Disclosure before settlement, both itemizing expected closing costs. Co-buyers should review these documents together to understand the full cost picture and agree on how to split each category.

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Some closing costs are fixed (recording fees, transfer taxes), while others are negotiable or shoppable (title insurance, survey, home inspection). Co-buyers may also negotiate seller concessions — where the seller pays a portion of closing costs — which reduces the group's total Cash to Close obligation.

Why It Matters for Co-owners

Co-buyers must decide whether closing cost contributions are treated as Capital Contributions that affect Equity at exit, or simply as transaction expenses split for convenience. This distinction matters at Buyout or sale: if one co-buyer paid a disproportionate share of closing costs, the group needs to have agreed in advance whether that party is reimbursed or whether the expense was absorbed.

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The Co-ownership Agreement should document the closing cost allocation method and clarify how those contributions are treated in exit and equity calculations.

Key Points

• Transaction fees and expenses due at settlement, often ranging from 2%–5% of the purchase price
• Include lender fees, third-party fees, government fees, and prepaid items
• Must be allocated among co-buyers by an agreed method before closing
• Co-buyers should decide whether closing cost contributions affect equity at exit
• Seller concessions can reduce the group's total cash to close obligation
• The Co-ownership Agreement should document the allocation method and exit treatment