Kovats Real Estate School Practice Test 2025 – 400 Free Practice Questions to Pass the Exam

Closing costs encompass various fees and expenses that are incurred during the process of closing a real estate transaction. The inclusion of real estate agent commissions in closing costs is a standard practice. These commissions generally represent a significant percentage of the sale price and are typically paid by the seller out of the proceeds from the sale at closing.

Other potential costs in the closing process can include title insurance, appraisal fees, and attorney fees, among others. The reason real estate agent commissions are classified as part of closing costs is that they are essential to compensating the agents who facilitated the sale, supporting the smooth transfer of property ownership.

In contrast, expenses such as property taxes and utility bills from the previous owners do not directly relate to the transaction's closing but instead are ongoing obligations that may or may not affect closing depending on local practices. Monthly mortgage payments are typically not included at closing; instead, they occur throughout the life of the loan after the closing has already taken place. Understanding what constitutes closing costs helps buyers and sellers prepare for the financial obligations accompanying a real estate transaction effectively.