In Pennsylvania, both buyers and sellers pay closing costs, and the split follows a fairly predictable pattern. Buyers cover the mortgage-related fees: loan origination, appraisal, lender’s title insurance, recording, and prepaid taxes and insurance. Sellers cover real estate agent commissions and the payoff of any existing mortgage. The realty transfer tax, which is the biggest Pennsylvania-specific line item, is split evenly between the two sides by custom. Almost all of this is negotiable in the purchase agreement.
The Realty Transfer Tax: Split Down the Middle
Pennsylvania charges a 1% state realty transfer tax on the value of any real estate transferred by deed.1Commonwealth of Pennsylvania. Realty Transfer Tax Local municipalities and school districts add their own tax on top. The combined rate lands around 2% in many parts of the state and climbs to 3% or higher in others.2Centre County, PA. Realty Transfer Tax Rates
Philadelphia is the most expensive place in the state for this tax. The combined rate there is 4.578%, made up of a 3.578% city portion and the 1% state portion.3City of Philadelphia. Philly’s Realty Transfer Tax Rate Is Now 4.578% On a $350,000 Philadelphia home, that is more than $16,000.
Under state law, buyer and seller are jointly liable for the full amount.1Commonwealth of Pennsylvania. Realty Transfer Tax The customary split is 50/50, but that is a convention, not a rule. In a buyer’s market, a motivated seller may agree to shoulder more than half; in a hot market, buyers sometimes offer to pay the seller’s half to sweeten a bid.
What Buyers Pay at Closing
If you are financing the purchase, most of your closing costs come from the lender’s side of the ledger:
- Loan origination fee, often 0.5% to 1% of the loan amount
- Appraisal fee for the lender-required property valuation
- Credit report fee
- Lender’s title insurance, required on virtually every mortgage
- Recording fees paid to the county for the deed and mortgage lien
On top of those, buyers bring prepaid items to the table. Expect several months of property taxes and homeowner’s insurance to go into an escrow account, plus mortgage interest accruing from closing day through the end of the month. A home inspection, paid earlier in the process, is also a buyer expense and typically costs a few hundred dollars.
Owner’s title insurance is optional but worth considering. It protects your equity against a later claim rooted in a recording error, undisclosed lien, or fraud. Pennsylvania is an all-inclusive rate state, meaning the quoted title insurance premium bundles the title search and settlement fees rather than itemizing them. The premium scales with the purchase price.
Pennsylvania does not require buyers to use an attorney at closing. Many do anyway, for review of the purchase agreement and title work. Fees for a straightforward residential closing typically run from several hundred to over a thousand dollars.
What Sellers Pay at Closing
Real estate agent commissions have historically been the seller’s largest closing expense, often 5% to 6% of the sale price and deducted from proceeds. That changed in August 2024, when new National Association of Realtors rules took effect. Listing agents can no longer advertise a commission offer to buyer’s agents through the MLS, and buyers must sign written agreements with their agent spelling out that agent’s compensation.4National Association of Realtors. Summary of 2024 MLS Changes
For Pennsylvania sellers, that means paying the buyer’s agent is no longer automatic. Some sellers still cover both sides to make the listing more attractive. Others pay only their own listing agent and leave the buyer to compensate theirs. Total commission exposure is genuinely negotiable now.
Beyond commissions, sellers commonly pay:
- Their half of the realty transfer tax
- Payoff of the remaining mortgage balance, plus a small recording fee to clear the lien
- Prorated property taxes through the closing date
- Prorated HOA dues, if the property is in an association
- Attorney fees, if a lawyer reviews the settlement
Sellers occasionally throw in a home warranty for the buyer. The cost is a few hundred dollars and covers appliance or system failures during the first year.
What’s Negotiable
Almost every closing cost except the transfer tax rate itself is open to negotiation. The purchase agreement is where allocation gets locked in, so the time to push is before signing, not at the settlement table.
Market conditions drive the leverage. When inventory is high, sellers routinely cover part of the buyer’s costs. When offers are stacking up, buyers sometimes offer to pay the seller’s share of the transfer tax to stand out.
Owner’s title insurance is another common negotiation point. In some parts of Pennsylvania, custom puts it on the seller; in others, the buyer pays. There is no statewide rule, so it becomes part of the contract talks.
One note worth knowing: a seller can agree to handle something outside of closing, such as paying for a specific repair directly, without it running through the settlement statement. Anything that does flow through settlement, though, gets scrutinized by the lender and may count against the concession limits described below.
Transfers That Skip the Transfer Tax
Pennsylvania exempts several kinds of transfers from the realty transfer tax entirely. The most commonly used exemptions are family transfers between:
- Spouses, current or former, for property acquired before the divorce
- Parents and children, including stepparents, stepchildren, and the spouse of a child
- Siblings, including the spouse of a sibling
- Grandparents and grandchildren, including the spouse of a grandchild
There is a catch. If the person who received the property through a family exemption transfers it again within one year, the tax applies as if the original owner had made the transfer directly.5Pennsylvania General Assembly. Pennsylvania Statutes Title 72 PS Taxation and Fiscal Affairs 8102-C.3
Other exempt transfers include property passing through inheritance, transfers to or from certain trusts including living trusts, corrective deeds that fix a prior recording error, and conveyances to government entities.6Legal Information Institute. 61 Pa. Code 91.193 – Excluded Transactions
Seller Concessions: How Much the Seller Can Pay for the Buyer
Seller concessions are one of the most common tools for shifting closing costs from buyer to seller. The buyer’s loan program caps how much the seller can contribute. Going over the cap doesn’t void the deal; the excess gets deducted from the sale price for loan calculation purposes, which can affect whether the buyer still qualifies.
FHA Loans
FHA-insured loans allow sellers and other interested parties to contribute up to 6% of the sale price toward the buyer’s closing costs, prepaid items, discount points, the upfront mortgage insurance premium, and interest rate buydowns.7U.S. Department of Housing and Urban Development. What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower Contributions above 6% trigger a dollar-for-dollar reduction in the property’s adjusted value.
Conventional Loans
Fannie Mae ties the concession limit to the buyer’s equity:
- Down payment under 10% (LTV above 90%): seller can contribute up to 3%
- Down payment of 10% to 25% (LTV 75.01% to 90%): up to 6%
- Down payment above 25% (LTV 75% or less): up to 9%
- Investment properties: up to 2% regardless of down payment
Contributions above these percentages are treated as sales concessions and reduce the property’s effective sale price for underwriting.8Fannie Mae. Interested Party Contributions (IPCs) A first-time buyer putting 5% down on a $300,000 home can receive at most $9,000 in seller concessions under conventional rules.
VA Loans
VA-guaranteed loans separate ordinary closing costs from concession items. Standard seller-paid closing costs such as title fees, recording fees, and permanent discount points have no percentage cap. Seller contributions toward specific concession items, however, are limited to 4% of the purchase price. That 4% bucket covers paying off the buyer’s debts, the VA funding fee, temporary rate buydowns, and incentives like appliance credits.