Closing costs in Arizona typically run 2% to 5% of the purchase price for buyers, separate from the down payment, while sellers pay agent commissions as their largest expense along with the owner’s title insurance policy. On a $400,000 home, a buyer might owe $8,000 to $20,000 at the table. Arizona charges no real estate transfer tax, which saves both sides money compared with many other states.
What Buyers Pay
Buyer costs split into two groups: fees tied to the mortgage and fees tied to the property.
On the loan side, the origination fee usually runs 0.5% to 1% of the loan amount. Your lender will also charge for pulling credit and ordering an appraisal, which costs roughly $350 to $550 for a standard single-family home. Larger or unusual properties cost more. You will pay for a lender’s title insurance policy, which protects the mortgage company (not you) if someone later challenges ownership; coverage equals the loan balance and shrinks as you pay it down.1Arizona Department of Insurance. Answers to Your Questions About Title Insurance
Prepaid interest covers the days between your closing date and the end of that month. Close on the 25th of a 30-day month and you owe five days up front. Your lender will also collect an initial escrow deposit to cover upcoming property tax and homeowners insurance payments.
Recording the new deed with the county costs $30 per document, set by Arizona statute.2Arizona Legislature. Arizona Revised Statutes 11-475 – Fees; Exemptions
A home inspection is technically optional but hard to justify skipping. A comprehensive inspection of a standard home runs about $300 to $425. In Arizona’s climate, add a wood-destroying organism report, which runs $75 to $200 and may be required by your lender, particularly on VA and FHA loans.
What Sellers Pay
The biggest seller expense is the real estate commission, and the structure has changed. Before the 2024 National Association of Realtors settlement, sellers routinely paid 5% to 6% of the sale price split between both agents. That automatic split is gone. Listing agent compensation is now typically negotiated at 1% to 3%, and buyer agent compensation is handled separately. You may still agree to contribute toward the buyer’s agent fee as a negotiating tool, but you are no longer expected to by default.
Arizona custom puts the owner’s title insurance policy on the seller. Unlike the lender’s policy, this one protects the buyer for the full purchase price and lasts as long as the buyer or their heirs own the home. The premium is a one-time charge at closing with no ongoing cost.1Arizona Department of Insurance. Answers to Your Questions About Title Insurance
Smaller charges fill out the seller’s column. An Affidavit of Legal Value must be attached to the deed before the county recorder will accept it,3Arizona Revised Statutes. Arizona Revised Statutes 11-1133 – Affidavit of Legal Value and it falls under the standard $30-per-document recording fee.2Arizona Legislature. Arizona Revised Statutes 11-475 – Fees; Exemptions Property taxes are prorated for the days you owned the home during the tax period. Close on June 30 and you owe exactly half the year’s taxes. If you still carry a mortgage, the full payoff including accrued interest comes out of your proceeds before you receive a check.
Sellers often buy a one-year home warranty for the buyer, especially in competitive markets or on older homes. Basic plans run $400 to $700 annually.
Escrow Fees and How Closing Works
Arizona transactions close through an escrow company rather than an attorney. The escrow officer acts as a neutral third party who collects funds, manages documents, and distributes money. Buyer and seller share the escrow fee, which scales with sale price. On a $400,000 home, expect the total around $1,070, with each side paying roughly half. On a $600,000 sale, roughly $1,350.
Arizona law also controls how your money moves. Under ARS 6-843, an escrow agent cannot disburse funds until deposits at least equal to the disbursements have cleared and are available for withdrawal.4Arizona Legislature. Arizona Revised Statutes 6-843 – Disbursements; Applicability The company needs verified “good funds,” meaning a wire transfer or a cashier’s check that has cleared the banking system. Until that happens, the deed cannot be recorded. Verification usually takes one to two business days after signing.
How Your Loan Type Changes Buyer Costs
The mortgage you choose has a direct effect on what you owe at closing.
FHA loans. The Federal Housing Administration charges an upfront mortgage insurance premium of 1.75% of the base loan amount. On a $380,000 loan, that is $6,650. Most borrowers finance this into the loan rather than paying cash at closing, but it still raises the loan balance and the monthly payment.5U.S. Department of Housing and Urban Development. Appendix 1.0 – Mortgage Insurance Premiums
VA loans. Veterans and active-duty service members pay a VA funding fee instead of mortgage insurance. For first-time use with less than 5% down, the fee is 2.15% of the loan amount. Putting 5% or more down drops it to 1.5%; 10% or more brings it to 1.25%. Veterans with service-connected disabilities are exempt.6Veterans Affairs. VA Funding Fee and Loan Closing Costs
Conventional loans. No upfront government fee, but if your down payment is less than 20%, you pay private mortgage insurance. The cost varies by credit score and loan-to-value ratio.
Seller Concession Limits by Loan Type
Buyers in Arizona frequently ask the seller to cover some closing costs. How much a seller can contribute depends on the buyer’s loan program, and exceeding the cap can disrupt the deal.
- VA loans: seller concessions capped at 4% of the home’s appraised value, including the funding fee, prepaid insurance, and even debt payoffs on the buyer’s behalf.6Veterans Affairs. VA Funding Fee and Loan Closing Costs
- FHA loans: up to 6% of the sale price toward the buyer’s closing costs and prepaid expenses.
- Conventional loans: 3% with less than 10% down; 6% with 10% to 24.99% down; 9% with 25% or more down.7Fannie Mae. Interested Party Contributions (IPCs)
Concessions over the limit get treated by the appraiser as reductions to the sale price, which can shift the loan-to-value ratio and change the buyer’s financing terms. A dollar figure that looks like a negotiating win can backfire if it pushes past the program cap.
HOA Transfer and Disclosure Fees
If the home sits in a homeowners association, add fees that can range from $200 to over $1,000. Arizona law generally prohibits transfer fees that benefit a developer or third party but exempts fees charged by an HOA for legitimate purposes such as document preparation and disclosure packages.8Arizona Legislature. Arizona Revised Statutes 33-442 – Prohibition on Transfer Fees; Exceptions; Definitions Who pays is set by contract. In the Phoenix metro area, sellers more commonly cover it.
Foreign Sellers and FIRPTA Withholding
If the seller is not a U.S. citizen or resident, the Foreign Investment in Real Property Tax Act requires the buyer’s side to withhold 15% of the total sale price and send it to the IRS.9Internal Revenue Service. FIRPTA Withholding On a $500,000 sale, that is $75,000 held back from the seller’s proceeds. The escrow company handles the withholding, but both parties should know about it early. FIRPTA does not apply when the seller is a U.S. person.
Reviewing Your Closing Disclosure
Three business days before closing, your lender must send a Closing Disclosure, a standardized five-page form itemizing every cost in the loan and the transaction.10Consumer Financial Protection Bureau. What Is a Closing Disclosure? This document gives you your exact cash-to-close number. Compare it line by line with the Loan Estimate you received when you applied. Origination fees and transfer taxes cannot increase at all (the transfer tax line should read zero in Arizona). Some other charges, like title insurance and recording fees, can increase by up to 10% if you used a provider from the lender’s list.
The escrow company will also prepare a settlement statement covering both sides of the transaction, including prorated property taxes and any HOA dues. Errors are much cheaper to fix before recording than after.
The Supplemental Property Tax Bill
One cost catches Arizona buyers off guard weeks or months after closing. When a home changes hands, the county assessor may reassess its value based on the purchase price. If you paid more than the previous assessed value, the county issues a supplemental bill for the difference, prorated for the rest of the tax year. These bills are separate from regular property tax payments and are typically not covered by your escrow account, so you pay them directly. It is not a penalty, just the county catching the assessment up to the actual sale price. Budget for it so it does not land as a surprise.