“Why are closing costs so high?” Bill Pulte, director of the Federal Housing Finance Agency, asked in a social media post earlier this month. While Pulte’s question may have been rhetorical, a recent report from LodeStar Software Solutions provides some answers.
Closing costs are fees paid at the closing of a real estate transaction. Buyers typically are responsible for items like title costs, lender fees, home appraisal costs and inspection fees. Sellers often pay for things like real estate agent commissions and transfer taxes, the latter of which are taxes incurred when a property’s ownership transfers from one individual or entity to another.
LodeStar, a Pennsylvania-based data company, found the states with the highest closing costs as a percentage of sales price tended to be those where transfer taxes made up the bulk of the real estate transactions’ overhead.
In 2024, Delaware had the highest closing costs as a percentage of sales price at 2.99%. It was followed by New York at 2.47%; Washington, D.C., at 2.39%; Pennsylvania at 2.36%; Vermont at 2.2%; Maryland at 2.03%; and Florida at 1.82%.
Each of those states or federal districts also ranked in the top 15 for highest state transfer tax rates as of October 2024, according to PropertyShark. Delaware, which leads all states in this dubious distinction, generally assesses a 4% realty transfer tax rate when state and local taxes are combined.
Those seven states or districts also led on a dollar basis for the highest average closing costs last year, according to the LodeStar report. Washington, D.C., ranked first at $17,545, followed by New York at $13,738; Delaware at $12,157; Maryland at $9,218; Vermont at $8,597; Florida at $8,492; and Pennsylvania at $8,259.
To put those numbers in perspective, closing costs averaged $4,661 nationally in 2024, which was about 1.06% of the national average home sales price of $438,236 last year, according to LodeStar.
By contrast, South Dakota, which had the lowest average closing costs last year at $1,551, also had the lowest closing costs as a percentage of sales price at 0.46%, per LodeStar data. Its state transfer tax rate is 50 cents per $500 of property value, or 0.1%.
