It matters because this is money you have to pay on top of your down payment. If you cannot cover your closing costs, you cannot buy the house. And if you want to be a savvy buyer, it is just as important to understand how to eliminate them.

My name is Jon Schwartz, I am a California Realtor, and last year I saved my clients over $505,000 in homebuying fees. Here is exactly what closing costs are, the real line items from an actual transaction, and how to wipe them out completely.

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Watch my full video on this topic below, or watch it on my channel instead.

What They Are

“Closing costs” is a blanket term for all the fees and expenses you take on when buying a house. It is money you have to bring to the closing table, on top of your down payment, to complete the purchase.

They are called “closing costs” because you do not pay them until the closing, the very end of the transaction. A purchase typically takes about a month to close, and at the end of it the escrow company sends you a bill for your down payment plus all of these costs.

The Ballpark

The total is different for every transaction, but as a general rule in California, closing costs run 1.5% to 2% of the purchase price.

So say you are buying a $1,000,000 home with 10% down. You can expect closing costs somewhere between $15,000 and $20,000. Add that to your $100,000 down payment, and you should have roughly $120,000 saved to complete the deal.

Every one of these fees shows up on a single document called the “settlement statement,” the final ledger for the transaction. The examples below come from a real California settlement statement.

Lender Fees

The biggest source of closing costs is lender fees, what your lender charges to complete your loan. There are the big ones with official-sounding names like the processing fee and the underwriting fee, and then a pile of smaller, seemingly arbitrary ones: a credit report fee, a tax service fee, an application fee, a verification of employment fee.

Is it a racket? Yes. Is there much you can do about it? Honestly, no. Every lender tacks on these little fees. What actually matters is the mortgage rate and the origination fee, and those are worth shopping for.

Escrow Fees

Next are escrow fees. The escrow company is a neutral third party that oversees the transaction because buying a house is a lot more complicated than buying a pair of shoes. It charges for that oversight, usually listed as the settlement agent fee, and like the lender, it adds its own run of small fees: a loan tie-in fee, a wire fee, a document fee, a compliance fee, even a UPS fee.

Is it a racket? Yes. Can you avoid it? Not really. In California it is customary for the seller to choose the escrow company, so as the buyer you do not even get a say. Every escrow company charges these miscellaneous fees, so do not let them get under your skin.

Title Fees

Then there are title fees. Having title to a house means you own it, and the county keeps track of who holds title to every property, like vehicle registration but for homes. Occasionally, two parties can claim title to the same house. It is rare, but to protect against it, buyers purchase title insurance, a policy that defends your claim in court and compensates you if you somehow lose the home to another claim.

This almost never happens, but today everyone buys title insurance anyway, and the title company adds its own stack of fees: an endorsement fee, a sub-escrow fee, a messenger fee, and several recording fees for the deed and the mortgage.

Prorations

There are also two categories that are not really fees. The first is prorations, which is just a fancy word for part of something, and it mostly refers to property taxes. If the seller has already paid property taxes past your purchase date, you pay them back for the portion you will own.

Prepayments

The second category is prepayments, which are exactly what they sound like. When you buy a home, you typically prepay a year of homeowner's insurance, and if it is a condo or townhouse, a year of HOA dues. This adds to your upfront cost, but then you are covered for a year, which is not a bad trade.

The Real Move

So that is the full picture: a stack of fees, some big and many small, plus a couple of prepayments, all due at the end of the transaction. Now here is how to eliminate the whole thing.

To explain how, I have to tell you about me – specifically me, not agents in general. I bought and sold three homes as a regular homebuyer and investor before I ever became an agent, and I became an agent because I hated working with agents! They seemed to offer very little value while charging a great deal of money.

So when I started working with buyers in 2020, I set out to offer more and charge less. Most buyers' agents take a 2.5% commission. On a $1,000,000 purchase, that's $25,000 that does not go toward actually buying the house. My commission is 1%. That's all I charge, and for that, I deliver top-tier guidance through the entire process, from crafting the right offer to negotiating with the seller to closing on time.

When you make an offer, you ask the seller to pay your agent's commission. It still comes out of the money you are putting down or borrowing, but on paper the seller pays it. Because my clients ask for 1% instead of 2.5%, their offers are far more competitive.

But there is a second way to play it. Some of my clients ask the seller for a full 2.5% commission. When that happens, I keep only 1% and credit the other 1.5% back to the client. And since closing costs run about 1.5% of the purchase price, that credit can wipe out your closing costs entirely. That is exactly what one recent client did: we asked for 2.5%, I credited back 1.5%, and their closing costs disappeared.

Conclusion

• Expect closing costs of 1.5% to 2% of the purchase price, on top of your down payment.
• Lender, escrow, and title fees are largely unavoidable, so focus your energy on your mortgage rate and origination fee.
• Prorations (property taxes) and prepayments (insurance and HOA) round out the bill.
• With a 1% agent who credits back the difference on a 2.5% commission, you can eliminate your closing costs entirely.

Closing costs are not a mystery once you see them for what they are, and they are not fixed in stone either.

These forms can lock you into working with an incompetent agent, or worse, force you to pay a commission to an agent who does not even represent you. And you are required to sign one before you view a single home.

Here is exactly what is safe to sign, what is not, and the one form you should never sign at all.

Watch Now

Watch my full video on this topic below, or watch it on my channel instead.

Where It Started

This whole mess grew out of an antitrust lawsuit that the National Association of Realtors lost and settled last year.

Some good came out of it. The rules about how agents get paid were reformed to add a little more transparency. But the Realtors also slipped in a gift to themselves: a new rule requiring home buyers to sign a representation agreement with a Realtor before viewing homes.

So now, whether you click “Request a Tour” on Zillow, call the listing agent directly, or follow up on a referral from family, the first thing you will be asked to do is sign a form that puts your relationship with that agent, and how much you owe them, in writing.

Four Forms

To create as much confusion as possible, the California Association of Realtors produced four different agreements. The good news is that two of them are completely safe to sign. The other two are where buyers get hurt.

Safe to Sign

The first safe form is the Open House Visitor Non-Agency Disclosure and Sign-In. You will see this at open houses, and it is 100% safe to sign. All it does is confirm what is already true: the agent selling the house does not represent you. Anything that agent says is for the seller's benefit, and they can repeat your conversation to the seller. That is true whether you sign or not, so signing costs you nothing.

The second safe form is the heavier Buyer (or Tenant) Non-Agency Agreement, an explicit statement that the seller's agent does not also represent you. By default nobody represents you unless you hire them, but California recognizes something called “implied agency,” so occasionally a seller's agent will want this in writing. If so, go ahead and sign.

The Dangerous Two

The next two forms are where you have to be very careful. These are the representation agreements you will run into the moment you connect with an agent to see homes. Sign the wrong one, or initial the wrong box, and you can lock yourself into a bad agent or end up paying an agent who does not even represent you.

They are the Buyer Representation and Broker Compensation Agreement and the Property Showing and Representation Agreement. Both set the commission your agent gets and how long you are tied to them, and both are filled with misdirection.

The Continuation Trap

Let's start with the Buyer Representation and Broker Compensation Agreement. It defines a representation period, which cannot exceed three months. Fair enough. But further down the page, under “Continued Right to Payment for Broker Involved Properties,” it defines a continuation period, and that one has no limit.

In plain English: even after your representation period ends, the agent can still be owed a commission on any home they were involved with during a continuation period that can run as long as they like.

My advice is simple: do not agree to a representation period longer than 30 days, and do not accept a continuation period longer than zero days. That is exactly the agreement I offer my own clients: a 30-day representation period and no continuation period.

False Comfort

The next trap is the Type of Representation. By default, this form is a non-exclusive representation agreement, which sounds reassuring. Non-exclusive should mean you are free to work with another agent if this one turns out to be a dud, right?

Not quite. A non-exclusive agreement means a commission is payable only if there was broker involvement, and broker involvement is defined incredibly broadly: showing a property, showing it virtually, submitting an offer, running a market analysis, or even just introducing you to a property.

So read that carefully. Even under a “non-exclusive” agreement, if the agent shows you a home, researches a home, or merely introduces you to one, you owe that agent a commission if you buy it, even if you would rather close the deal with someone else.

This is the line dishonest agents lean on. They will say, “You have to sign before we can look at homes, it is the new rule, but do not worry, it is non-exclusive, so you are not even obligated to work with me.” That is true-ish. But you are still obligated to pay them a commission on any home they showed you. This is exactly why you should talk to several agents and actively choose who you want before you sign anything.

Never Exclusive

Here is where it gets worse. Most agents are not satisfied with a non-exclusive agreement. Most will hand you a version with the “exclusive” box checked, which entitles the broker to a commission if you buy any property during the representation period, with or without their involvement, even if another broker also represented you.

So let me be blunt: never sign an exclusive representation agreement. If you find an agent you like better, too bad. If your uncle offers to sell you his condo with no agents involved at all, too bad. You have agreed to pay this one agent a commission no matter what. And by default, canceling an exclusive agreement requires 30 days' notice.

The California Association of Realtors knows exactly how heavy this is because, for it to take effect, you have to initial a special boxed section that repeats the same language. Whatever you do, do not initial the special boxed section! When I send these contracts to my clients, I do not even give them the option.

The Shortcut Trap

That leaves the Property Showing and Representation Agreement, and my advice is to never sign it at all.

The listings websites make a lot of money connecting buyers to agents, and contracts slow that machine down. So the California Association of Realtors produced this streamlined, two-page version to keep things moving. It works like the longer agreement, except you list specific properties, the representation period is capped at 30 days, and it can only be non-exclusive.

That is the pitch you will hear if you connect with an agent through Zillow: it is short, and it is non-exclusive. But you already know the catch. Showing a home counts as broker involvement, and broker involvement means a commission. So under this “non-exclusive” agreement, you are still committed to pay the agent who shows you those homes. Skip it, and stick with the longer Buyer Representation and Broker Compensation Agreement, filled out correctly, now that you understand it.

Smart Advice

So how do you protect yourself? Sign the two open house forms freely, since they cost you nothing. But before you sign either representation agreement, talk to several agents and actively choose the one you want. When you click “Request a Tour” on Zillow or “Request Showing” on Redfin, you are simply handed to whichever agent paid the most for the lead, and agents who buy leads are often the ones to avoid. Line up a few conversations while you are getting pre-approved, and pick your agent on purpose.

Conclusion

Agents love to talk about the value they bring, but most of them make their money by gatekeeping the process, and the new 2025 paperwork just hands them new ways to do it.

• Sign the open house forms freely; they cost you nothing.
• If you sign the Buyer Representation and Broker Compensation Agreement, keep the representation period at 30 days, set the continuation period to zero, and never initial paragraph 15.
• Never sign an exclusive representation agreement.
• Never sign the Property Showing and Representation Agreement.

Read the fine print, refuse the traps, and you keep control of both your home search and your money.

If you want to work with a California agent who offers a fair, 30-day, non-exclusive agreement with no continuation period and a 1% commission, that is exactly what I do.

This is not a loophole anyone is sneaking through; it is how the system was designed to work. Even the Department of Justice has raised concerns about the rules behind it. 

As a California Realtor, I am here to expose the con and show buyers how to avoid it.

Watch Now

Watch my full video on this topic below, or watch it on my channel instead.

Historic Monopolies

In 1985, if you wanted to buy a home in Modesto, you had two options. 

You could drive around looking for "For Sale" signs, or you could use the confidential Multiple Listing Service book. That book was not public. 

The only way to see organized listings was to hire a Realtor, and that is exactly where their value came from. They held the keys to the data. 

Back then, charging for access to that information was a legitimate business model.

Digital Freedom

Then everything shifted. Platforms like Zillow, Redfin, and Realtor.com put virtually every listing in America online for free, and the experience is far better than the old books. 

Instead of cryptic abbreviations that needed a professional to translate them, you get photos, videos, and 3D tours. You can draw a circle on a map and have curated listings emailed to you instantly. Compared to the old system, it is practically magic.

Weak Value

So if the information is now free, how are Realtors still charging a 2.5% or 3% commission? They justify it with lists of 111 tasks, padded out with items like "taking notes" or "virtually previewing properties." Yet the Realtors Code of Ethics actually bars them from advising you on construction, law, or inspections. 

Unless an agent has significant personal experience with homeownership and renovations, the professional value on offer is often quite thin.

New Gatekeeping

In August 2024, following an antitrust lawsuit, Realtors changed their own rules. 

Now buyers have to sign a contract agreeing to pay a commission before they can even view a property. It is a massive new layer of gatekeeping. Agents will reassure you that the seller pays the commission, but that is a trick. 

Say you offer $1,000,000 on a home and build in a 2.5% commission. You are really only offering the seller $975,000, and you will lose to the buyer who offers the full $1,000,000.

Smart Advice

So how do you avoid the grift? 

Start by visiting open houses on your own. They are always free, and you do not need a representation agreement to walk through one.

Do not sign anything with a Realtor until you genuinely like and trust the person in front of you. 

And most importantly, never sign an exclusive representation agreement. 

That kind of contract can obligate you to pay a commission even if that agent has nothing to do with the home you eventually buy.

Conclusion

The real estate industry has evolved, but many of its practices are still built to protect high fees rather than the people paying them. 

• Visit open houses on your own to learn the market without signing anything.
• Hold off on any agreement until you have found an agent you actually trust.
• Avoid exclusive representation agreements that can charge you fees regardless of who does the work.
• Remember that a commission built into your offer makes your bid less competitive.

Stay informed, refuse to sign early contracts, and you keep control of both your home buying process and your money.