In a Montana home sale, who pays closing costs is set by the purchase agreement rather than by state law, but custom runs a predictable split: buyers cover the costs tied to their mortgage and inspections, and sellers cover agent commissions, the owner’s title insurance policy, and their share of the year’s property taxes. Montana charges no state real estate transfer tax, which removes one of the biggest line items that shows up at closing in most other states. Everything else is negotiable, and the 2024 changes to how buyer-agent commissions get paid have made the allocation question more active than it used to be.
What the Buyer Usually Pays
Most buyer costs flow from the loan. Lenders charge an origination fee of roughly 0.5% to 1% of the loan amount to cover underwriting and processing. On a $400,000 mortgage that is $2,000 to $4,000. Buyers who want a lower interest rate can also pay discount points, each equal to 1% of the loan, though points only pay off if you stay in the home long enough for the monthly savings to catch up to the upfront cost.
The lender will require a professional appraisal, which in Montana generally runs $400 to $800 depending on the property. A credit report pull typically costs less than $30.1Consumer Financial Protection Bureau. How Much Does It Cost to Receive a Loan Estimate? The buyer also pays for a lender’s title insurance policy, which protects the mortgage holder against defects in the title and is separate from the owner’s policy the seller provides.
Recording the deed with the county clerk and recorder is a buyer cost in most Montana transactions. Under state law the fee is $20 for the first page and $10 for each additional page, with a $10 surcharge if the document does not meet state formatting standards.2Montana State Legislature. Montana Code 7-4-2637 – Fees for Recording Documents – Rulemaking
Inspections
Home inspections are not legally required in Montana, but buyers almost always pay for them. A standard inspection runs $300 to $500 depending on the home’s size and age. Montana geography adds a few more that are worth considering: radon testing at $150 to $700 given elevated radon levels in many counties, a sewer scope at $125 to $500 for homes on private sewer lines, and a septic inspection at roughly $100 to $600 for properties on septic systems.
What the Seller Usually Pays
Real Estate Agent Commissions
Agent commissions remain the largest single closing cost on the seller’s side, and the rules changed in August 2024. Before the change, sellers automatically paid both their own listing agent and the buyer’s agent, with the combined commission typically running 5% to 6% of the sale price. After the National Association of Realtors settlement, sellers negotiate their listing agent’s fee and then separately decide whether to offer any compensation to the buyer’s agent.
Buyers now sign a written agreement with their own agent before touring homes that spells out what that agent will be paid and who will pay it. In practice many Montana sellers still offer some compensation to the buyer’s agent to draw more showings, but it is no longer automatic. Total commissions have drifted closer to 5% to 5.5%, which on a $400,000 home is still $20,000 to $22,000 coming out of someone’s pocket. Whose pocket is now a live negotiation.
Owner’s Title Insurance
Montana custom puts the owner’s title insurance policy on the seller. The policy protects the buyer against defects in the property’s title history, such as undisclosed liens, boundary disputes, or forged documents in the chain of ownership. Premiums scale with the purchase price: about $853 at a $200,000 sale price, roughly $1,320 at $400,000, and about $1,740 at $600,000.3First National Title Insurance Company. Montana Title Insurance Rates Custom is strong on this point in Montana, but the purchase agreement can assign the cost to the buyer.
Property Tax Prorations and Loan Payoff
Montana property tax bills for the current year go out in late October, with the first half due by November 30 and the second half due by May 31.4Montana Department of Revenue. Residential Property Because the bill arrives late in the year, a seller who closes mid-year has typically occupied the property without paying that year’s taxes yet. At closing, the seller reimburses the buyer for the portion of the year the seller owned the home, calculated to the day by the title company.
Any existing mortgage, home equity line, or other lien gets paid off from the sale proceeds before the seller receives anything. The closing agent verifies payoff figures directly with the seller’s lender before disbursing funds.
Costs Commonly Split
The closing agent or title company charges a settlement fee of roughly $350 to $1,000 for holding the earnest money, coordinating documents, disbursing funds, and confirming every condition in the purchase agreement has been satisfied. This fee is commonly split evenly between buyer and seller, though the purchase agreement controls the actual allocation.
Closings generate multiple notarized signatures. Montana caps notary fees at $10 per notarial act, including acknowledgments and witnessed signatures.5Montana State Legislature. Montana Code 1-5-626 – Fees for Notarial Acts – Collection of Fees The total is modest but shows up on the settlement statement for whichever party signed the document.
Filings Neither Party Can Skip
The Realty Transfer Certificate
Montana requires a Realty Transfer Certificate for every real property transfer, and the county clerk and recorder will not accept a deed for recording until that certificate has been completed and submitted.6Montana State Legislature. Montana Code 15-7-305 – Realty Transfer Certificate Required The certificate declares the price paid and is used by the Department of Revenue to track sales and assess property values. The parties, their agents, or their attorneys can complete it, and the filing cost is wrapped into the standard recording fee.
Water Rights Transfers
Properties that come with water rights require a separate ownership update filed with the Montana Department of Natural Resources and Conservation. For a standard update using Form 608, the DNRC charges $100 for the first water right and $20 for each additional right on the same form, capped at $600. Form 643, used for severed water rights, costs $50.7Montana Department of Natural Resources and Conservation. Fee Schedule for Water Use in Montana Missing this step can create real problems for the buyer’s ability to use water on the property, so the closing agent should flag it early when water rights are part of the deal.
Shifting the Split: Negotiation and Seller Concessions
Nothing in Montana law dictates who pays which closing cost, so the initial offer is where the negotiation starts. In a competitive market, buyers sometimes offer to cover items traditionally paid by the seller, like the owner’s title policy. In a slower market, sellers may agree to pay some of the buyer’s loan-related costs to close the deal.
Seller concessions are the standard tool for a buyer who is short on cash at closing. The seller credits a dollar amount or percentage of the price toward the buyer’s closing costs, reducing what the buyer has to bring to the table. Concessions have hard caps set by the buyer’s loan program:
- FHA loans: concessions cannot exceed 6% of the sale price.
- VA loans: concessions are capped at 4% of the sale price, not counting typical closing costs the seller might already be covering.
- Conventional loans: less than 10% down means a 3% cap; 10% to 25% down allows up to 6%; more than 25% down allows up to 9%. Investment properties are capped at 2% regardless of down payment.
Exceeding the cap doesn’t just void the overage. The lender may reduce the loan amount dollar-for-dollar by the amount over the limit, which can derail the financing. If you are negotiating without an agent, keep these thresholds in mind before committing to a number.
Tax Costs That Hit the Seller After Closing
Closing costs are not the only money a Montana seller needs to plan for. Sellers who used the home as a primary residence for at least two of the five years before the sale can exclude up to $250,000 in profit from federal income tax, or up to $500,000 for married couples filing jointly.8Internal Revenue Service. Topic No. 701, Sale of Your Home Both spouses must meet the use requirement for the higher exclusion, though only one spouse needs to meet the ownership requirement.9Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence Given recent appreciation in Bozeman, Missoula, and Flathead County, sellers should run the numbers; gains above these thresholds are taxed as capital gains.
The closing agent generally files Form 1099-S with the IRS to report sale proceeds. If no closing agent is involved, the responsibility falls in order to the buyer’s attorney, the seller’s attorney, the title company, or the mortgage lender, and the parties can also designate who files through a written agreement at or before closing.10Internal Revenue Service. Instructions for Form 1099-S Sellers who qualify for the full exclusion may not receive a 1099-S if they certify the entire gain is excludable, but keeping records of the original purchase price and improvement costs is still worth doing.
If the seller is a foreign person or entity, the buyer must withhold 15% of the sale price and send it to the IRS under the Foreign Investment in Real Property Tax Act. The rate drops to 10% when the price is between $300,001 and $1,000,000 and the buyer will use the property as a residence, and no withholding is required when the price is $300,000 or less and the buyer intends personal use.11Office of the Law Revision Counsel. 26 USC 1445 – Withholding of Tax on Dispositions of United States Real Property Interests Foreign sellers can apply for a withholding certificate before closing to reduce the amount withheld when their actual tax liability will be lower.