Closing costs in Tennessee: Who pays for what

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Real estate deals aren’t just about a home’s sale price. There are also closing costs to consider, both for the homebuyer and the seller. These fees must be paid upfront in order to finalize the deal, and they can run thousands of dollars above and beyond the home’s price tag. In fact, closing costs can tack on an additional 2 to 5 percent of a home’s purchase price (not including real estate commissions), according to Freddie Mac.

For buyers, closing costs are mostly related to their home loan and financing, while sellers pay their own set of costs — however, who pays for what can vary widely from one state to another. Here’s a closer look at closing costs in Tennessee.

How much are closing costs in Tennessee?

According to a January 2024 study from insurance company Assurance, nationwide closing costs average $4,243. In Tennessee, one of the least-expensive closing cost states in the country according to the study, the average is just $3,090. That equates to only 1.74 percent of the median home sale price in the Volunteer State, according to its data. And it’s on par with many of its Southern neighbors: For example, in North Carolina that figure is 1.57 percent, and in Kentucky it’s 1.94 percent.

Redfin data shows the median home price in Tennessee in March was $379,400 — 1.74 percent of that would put closing costs for a median-priced home at about $6,600. The amount will vary based on what area of the state you’re in, though. For example, median prices in Nashville are higher at $474,995, per Redfin, while in Memphis they’re a much lower $174,000.

Who pays closing costs in Tennessee, buyers or sellers?

The full amount of closing costs isn’t the sole responsibility one party; both buyers and sellers pay their fair share. Who pays for what varies: Different states have different rules and guidelines. Generally, buyers are on the hook for fees related to getting financing, including paying for the appraisal and lender-related charges, and sellers often pay a fee to transfer the home’s title and other costs. Here are some common closing costs for home sellers and buyers in Tennessee:

Closing costs for buyers

• Lender-related fees: For buyers financing their home purchase with a mortgage, these can include fees for a credit check, loan origination, underwriting, and application or processing fees.
• Home inspection and appraisal: Mortgage lenders will require a professional appraisal, to ensure the home is worth at least the amount of the loan. And while a home inspection is not mandatory, it’s smart to get one to ensure there are no major problems.
• Transfer taxes: Tennessee buyers are responsible for paying the costs associated with transferring the home’s title from the seller to them. The rate is 37 cents per every $100 in value — on a median-priced $379,400 home, that comes to around $1,400.
• Title-related fees: In Tennessee, the buyer often pays for both the owner’s and the lender’s title policy, which protects in case of ownership issues related to the home’s title. There will also likely be a fee for a title search.
• Prepaids: Frequently, buyers must lay out a set amount of prepaid property taxes and homeowners insurance premiums at the closing. These funds are held in escrow and disbursed as needed by your mortgage servicer.

Closing costs for sellers

• Agent commissions: While the way real estate agent commissions get paid will change later this year, under the current system the seller is responsible for paying both their own agent and the buyer’s agent. This will likely be the seller’s biggest expense — assuming a 5 percent total commission on a median-priced $379,400 home, that’s nearly $19,000.
• Title-related fees: Tennessee buyers often pay these costs, but sellers sometimes do as well.
• Property taxes and HOA fees: The seller is responsible for being up-to-date on these costs up until the day the sale closes.
• Concessions: Often, sellers will agree to either pay a portion of the buyer’s closing costs or pay to cover the cost of a needed repair to the home. Seller concessions are not mandatory but they can help sweeten the deal or keep things moving faster.

Lowering your closing costs in Tennessee

Closing costs in Tennessee are more affordable than in most states. But, while things like taxes are not up for debate, many closing costs are negotiable and there are ways to lower how much you pay.

For sellers, this will likely involve negotiating your real estate agent’s commission rate. Buyers should look into whether they are eligible for any available financial assistance programs, which help cover the cost of the down payment and closing fees. These may be offered by the state, city or county, particularly for first-time homebuyers, and can take the form of grants or low- or no-interest loans. Some lenders also offer no-closing-cost mortgages — but keep in mind with these that the fees will likely be rolled into your loan, rather than paid upfront, which helps in the short-term but means you have to pay interest on them in the long-term.

Find a local real estate agent

Whether you’re buying or selling a home in Tennessee, an experienced local real estate agent can help. Agents know their local markets well — they can help sellers bring in top dollar, or help buyers find a home they can afford that meets their needs. Ask around for recommendations, read online reviews, and interview several candidates to find someone you click well with.

FAQs

• Does the seller pay closing costs in Tennessee?

  Yes. In any state, both the buyer and the seller pay some form of closing costs. In Tennessee, a home seller’s closing costs are likely to include agent commissions, prorated property taxes and HOA fees (if applicable) and any concessions made in the contract-negotiation process, among other things.

• What is the most expensive part of closing costs?

  The most expensive part of closing costs is typically the commissions paid to the real estate agents handling the transaction. The total usually comes to somewhere between 5 and 6 percent of the home’s sale price, and as of now, it’s the responsibility of the seller to pay. That is likely to change in July, when new rules go into effect due to a federal court settlement.