California Real Estate Transaction: Who Pays What?

In California real estate, there are a lot of moving parts. And one of the most misunderstood aspects of a transaction is the breakdown of escrow fees. We’re often asked, “Who pays what?” When it comes to closing costs and escrow services, especially in a competitive housing market like the one we see here in Covina and throughout Southern California, here’s the deal.

As an independent escrow company, we want to make this process as transparent and straightforward as possible for both buyers and sellers. Whether you’re a first-time homebuyer, a seasoned investor, or a seller preparing for your next move, knowing who typically pays which escrow fees in California can help you better prepare for closing day.

Let’s walk through how escrow fees work and what you can expect.

What Are Escrow Fees?

Escrow fees are the charges associated with the management of the escrow process during a real estate transaction. As your neutral third party, we handle the collection and distribution of funds, ensure all contractual conditions are met, and facilitate the safe transfer of property ownership. Escrow services also include document preparation, title coordination, and disbursement of funds like commissions, loan payoffs, and taxes.

These fees compensate us for this service, and they’re generally a standard part of any real estate transaction involving a mortgage loan or significant transfer of funds

Escrow Fees Are Negotiable—But Traditions Exist

In California, escrow fees are not fixed by law, which means they can be negotiated. However, certain regional customs influence who typically pays these fees. In Southern California, including Covina, it’s customary for the buyer and seller to split the escrow fees 50/50. In Northern California, the fees are more commonly paid by the buyer.

Still, there are no hard-and-fast rules. It all comes down to what is negotiated in the real estate purchase agreement. If the market is hot and the seller has leverage, the buyer may be expected to cover more of the closing costs—including escrow. Conversely, in a slower market, sellers might agree to pay a larger share to sweeten the deal.

Escrow Fee Breakdown: Who Pays for What?

Here’s a general breakdown of typical escrow-related fees and who traditionally pays them in a Southern California real estate transaction. Keep in mind, these allocations can vary based on negotiation and contract terms:

Buyer Typically Pays:

• Escrow fee (50%)

• Lender’s title insurance

• Loan tie-in fee

• Notary fees (for loan documents)

• Recording fees for the deed and mortgage

• Appraisal and credit report fees (paid outside of escrow)

• Home inspection and termite inspection (depending on contract)

• Homeowners insurance premium

• Prepaid property taxes and interest (prorated based on closing date)

• HOA transfer fees (depending on agreement)

Seller Typically Pays:

• Escrow fee (50%)

• Owner’s title insurance policy

• Real estate agent commissions (usually 5-6% split between listing and buyer’s agents)

• Document preparation fees

• Transfer tax (city or county)

• Recording fees for any releases or reconveyance documents

• HOA document fees (if applicable)

• Outstanding property taxes, utility balances, or liens

• Termite clearance or repairs (depending on contract)

Again, this is just a guideline. When you’re working with a knowledgeable agent and escrow officer, you’ll be able to see an itemized breakdown of what you’re responsible for before closing.

Why Escrow Fees Vary

Escrow fees can vary based on the sales price of the home, the complexity of the transaction, and the escrow company involved. Some companies charge a flat fee, while others calculate fees on a sliding scale based on the purchase price. There might also be additional fees for specific services, such as mobile notary appointments or rush document processing.

One thing we always recommend is asking for a preliminary settlement statement early in the process. This document gives both buyers and sellers a snapshot of estimated costs, so there are no surprises at the closing table.

Escrow and the Current Housing Market

With today’s evolving housing market, impacted by fluctuating interest rates and rising home values, understanding every aspect of the real estate transaction—including escrow fees—can help buyers and sellers plan their finances more effectively.

Buyers are often stretching to afford their monthly mortgage loans, so knowing ahead of time what their share of escrow costs will be is critical. Sellers, too, are weighing their proceeds and determining how best to use them for their next purchase or investment.

We’ve seen in Covina and across the San Gabriel Valley that a clear understanding of escrow costs helps deals close faster and more smoothly. With competition high and inventory tight, getting these details ironed out early can be the difference between a successful closing and a missed opportunity.

Other Fees to Consider (Outside Escrow)

While escrow handles many of the key transactional fees, there are other costs to be aware of that aren’t processed directly through escrow:

• Real estate agent fees are agreed upon before listing and paid through escrow but negotiated independently.

• Mortgage-related fees like points or origination charges are set by the lender and may be paid at closing.

• Prepaid costs, like insurance and taxes, are also estimated by the lender and handled at the funding stage.

• It’s always a good idea to consult with your real estate agent, mortgage lender, and escrow officer to get a full picture of all fees.

Questions? We’re Here to Help

Buying or selling a home is a major milestone, and the escrow process plays a big role in making it successful. We know how important it is to understand your financial obligations when you enter a real estate transaction. Our team in Covina is committed to providing clarity and support every step of the way.

If you’re preparing to enter the real estate market or simply have questions about how escrow works in California, we’re happy to walk you through it. Give us a call anytime—you don’t have to be in a transaction to speak with an escrow officer. Having the right information up front is one of the best ways to protect yourself and your investment.

Final Thoughts
At the end of the day, escrow fees are just one piece of a much larger puzzle in a California real estate transaction. Whether you’re looking at buying your first home, selling your current property, or investing in another, understanding who pays what helps eliminate surprises and keeps your deal on track.

ABOUT EASTLAND ESCROWS IN COVINA, CALIFORNIA

If you’re a real estate agent or broker representing buyers and sellers. Or, if you are considering buying or selling a home, please consider calling Eastland Escrows, Inc. to manage the escrow account. Celebrating our 50th anniversary, we are an independent escrow company based in Covina, CA serving Southern California since 1973. With more than 100 years of combined experience, we pride ourselves in working like a dog for you on behalf of all our clients! We have closed thousands of escrow transactions from real estate sales and refinances to business sales and mobile homes.