Differences in state and local rules, and home prices, create large variations in purchase-loan closing costs far beyond the national average.
State variations span a broad four- to five-digit range or either side of a U.S. average of $7,335 when transfer taxes are included, according to CoreLogic’s latest numbers, which reflect the first half of 2023.
“The costs are increasingly high and they are differentiated,” said Rajul Sood, managing director and head of banking at Acuity Knowledge Partners.
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The state with the lowest average closing cost, at $2,348, is Missouri, which lacks a real-estate transfer tax. At the other end of the scale is Delaware, where the closing costs total $18,173. When Delaware’s transfer tax is excluded, closing costs average just over $4,139.
(Transfer taxes are traditionally paid by the seller.)
Other jurisdictions’ closing total costs can be even higher than Delaware’s.
Washington, D.C.’s average for closing costs tops $30,000 and accounts for 3.77% of the average $795,918 home price. Without taxes, closing costs in the district are just shy of $6,325.
Some of the regional differences result both because of home prices and transfer taxes, which can be imposed at the state or local level.
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The Key West, Florida, core-based statistical area averages just over $20,595 in closing costs, constituting 1.86% of its high average price. Without taxes, closing costs total almost $8,199. The average value of a Key West home tops $1.1 million in CoreLogic’s numbers.
With taxes, the New York county average closing cost is more than $73,000 or 4.99% of its more than $1.46 million average home price. Even without taxes, closing fees in New York county total $10,124 on average.
Some jurisdictions also have mansion taxes that are particularly high for pricey homes. New York state, for example, imposes an escalating mansion tax that all properties valued at $1 million or higher.
All things being equal, though, it’s lower-income buyers that face a disproportionate closing cost burden, according to Sood.
“Closing fees are regressive,” she said, citing government-related mortgage investor Fannie Mae’s 2023 study of 1.1 million homebuyer loans it purchased during the pandemic-era housing boom.
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Fannie found that on a median basis, low-income first-time buyers’ share of closing costs as a percentage of the purchase price exceeded that of all home purchasers by 13%.
Being in a flood-prone area can be another geographic differentiator when it comes to closing costs, due to the cost of extra services or insurance required to address the risk. Areas disasters hit also may have higher closing costs due to things like an additional appraisal.
“There are flood zone investigations that have to be conducted separately for certain areas,” she said. “In certain jurisdictions, these costs keep increasing on top of traditional fees.”
However, certain jurisdictions and entities in them will give borrowers with lower incomes or in disaster areas help with closing costs.
“Some of these government agencies are making closing costs much more affordable,” Sood said.
