March 2023

Closing costs continue to vary widely across states

StateAverage Home PriceAverage Total Closing Costs with TaxesAverage Total Closing Costs without Taxes
District of Columbia$769,351$29,888$6,502
New York$538,102$16,849$6,168
New Hampshire$351,365$8,183$2,804
New Jersey$461,488$7,915$4,158
Rhode Island$412,037$5,568$3,419
New Mexico$316,010$3,513$3,513
South Carolina$298,817$3,447$2,501
North Carolina$306,300$3,406$2,642
West Virginia$191,011$3,406$2,465
South Dakota$232,564$3,105$2,843
North Dakota$243,312$2,501$2,501

While buyers are mainly focused on a home's purchase price and mortgage interest rate, many tend to overlook closing costs or, in high transfer tax states, may view them as a necessary evil.

This is essentially true for sellers too, a large number of whom are also buying another home. Of course, if your client is buying and selling at once, they'll be hit with two sets of closing costs. It's also best to prepare your first-time homebuyers well in advance with the closing costs they should expect to pay.

In 2021, the latest full year available, the national average closing cost figure for a single-family home was $6,905, including transfer taxes, and $3,860 excluding taxes. These costs amounted to increases of 13.4% and 11.2% over 2020, respectively. However, most of these gains were due to the extraordinary year-over-year home price increases themselves, by more than $50,000.Footnote1

How states compare

The map provides average closing cost price ranges for each state in 2021, with taxes, while the attached table lists each state's actual closing costs, both with and without taxes.

The five states (and district) with the highest average closing costs, including transfer taxes, are the District of Columbia ($29,888), which is in its own price stratosphere, followed by Delaware ($17,859), New York ($16,849), Maryland ($14,721) and Washington state ($13,927), with all but one hailing from the Northeast.Footnote1

In contrast, if you work in the nation's midsection, your clients will typically benefit from more affordable average closing costs. After Missouri ($2,061), the lowest closing cost state, including taxes, comes Indiana ($2,200), North Dakota ($2,501), Wyoming ($2,589) and Mississippi ($2,756).Footnote1

Understanding real estate transfer taxes

While transfer taxes, which are imposed on the transfer of title of real property, account for a disproportionately high percentage of closing costs in many states, there are actually 13 states with no real estate taxes, plus two others with only some municipal or county taxes (see the table for details).Footnote2 As you'd expect, in states with transfer taxes, they are based on the value of the property transferred.

State statutes may also stipulate whether the buyer and/or seller is responsible for their payment; otherwise, their payment is set by convention or could be negotiated. Most statutes include cases in which the transfer is even exempt from taxation, such as in a divorce.

If you're not familiar with the term real estate transfer tax, they're also known by other names in different states, including realty transfer tax, deed transfer tax, stamp tax, conveyance tax, documentary transfer tax and recordation tax.

A general explanation for the large disparity in the assessed transfer tax, including none at all, is that our 50 states, plus the District of Columbia, vary widely in the amounts and mix of taxes they collect through property, income, corporate, sales, estate, gasoline, etc.

An overview of other closing cost fees

A recent, nationwide rundown on other closing costs fees, from the Federal Reserve, should give you a sense of how your state's fees compare to others.Footnote3

  • Lender application fee - $75 to $300
  • Loan origination fee - 0% to 1.5% of loan amount
  • Title search and insurance - $700 to $900
  • Appraisal fee - $300 to $700
  • Settlement/Closing fees, recording fees, attorney's fees - $500 to $1,000
  • Land surveys - $150 to $400
  • Private mortgage insurance (PMI) - the first payment is usually due at closing, generally from 0.5% to 1.5% of the loan amount
  • FHA, VA and USDA loans- 1.75% of the loan amount (FHA); from 1.4% to 3.6% of loan amount (VA); and 1% of the loan amount (USDA)Footnote3

You can help your clients process the impact of closing costs by having an open discussion on the subject early on. Plus, by recommending a loan preapprovalFootnote4 with a recognized lender, such as Bank of America, your clients can be well informed and any future surprises largely avoided.

1 Average Closing Costs for Purchase Mortgages Increased 13.4% in 2021, CoreLogic's ClosingCorp Reports, ClosingCorp®, April 21, 2022. Accessed January 2023.

2 Real Estate Transfer Taxes: What Is This Little-Known Extra Cost to Sell Your Home?, HomeLight, Valerie Kalfrin, January 8, 2023. Accessed January 2023.

3 The average mortgage closing costs, by state, Insider, Liz Knueven and Molly Grace, October 11, 2022. Accessed January 2023.

4 Final loan approval is subject to satisfactory appraisal and title review and no change in borrower credit and financial condition. Preapproval is subject to terms and conditions and timely submission of required documentation; ask your Lending Specialist for details. Preapproval does not commit to the continued availability of the loan program. The interest rate shown in a preapproval is based on our current pricing and is not locked. You may choose to lock an interest rate after we receive the complete and executed purchase contract. Borrower must submit purchase contract within 90 days of preapproval. If the rate at time of lock is higher, or a rate lock expires prior to funding, or for adjustable-rate loan programs when the index value rises, we must determine your ability to repay the loan at the higher rate, which may lower the loan amount or invalidate the preapproval. Not available on all loan products. Not available on refinance loans.

MAP5455958 | 02/2023

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