What Are Escrow Fees?

Escrow fees, also known as closing fees or settlement fees, are charges paid to an escrow company or real estate attorney for managing the escrow process during a real estate transaction. Typically, escrow fees cost 1%-2% of the home’s sale price, but the amount may vary. Some attorneys charge a flat closing fee instead of a percentage.

An escrow company or real estate attorney is a neutral third party that collects and holds the home buyer’s and seller’s funds until contract contingencies are met and the sale is finalized. Once that happens, the escrow company distributes the funds, which includes withdrawing an escrow fee for their services. The company also handles much of the paperwork involved in the transaction. 

The escrow process may be managed by an escrow or settlement agent or company, a real estate attorney or a title company.

Who pays for escrow fees?

Typically, the buyer and seller each pay a portion of escrow fees based on the terms of their purchase agreement. Often, it’s divided between the parties, but buyers may ask the seller to pay for more. You can find the exact amounts the buyer and seller are responsible for on the Closing Disclosure.

Escrow fees vs. escrow payments

It’s easy to confuse escrow fees with escrow payments. Escrow fees are paid directly to the escrow company as compensation for holding funds and managing the paperwork during a real estate transaction. In contrast, escrow payments are paid into an escrow account when you close your mortgage, and often on an ongoing basis as you make loan payments. Depending on your lender, escrow payments may include homeowners insurance and mortgage insurance premiums, as well as property taxes. Your lender or servicer pays these bills on your behalf out of the escrow account.

Types of funds held in escrow

• Buyer’s earnest money deposit
• Seller’s proceeds
• Closing costs
  • Escrow or attorney fees 
  • Loan origination fee and any points
  • Title search and title insurance fees
  • Appraisal fee
  • Courier or delivery fees
  • Wire transfer fees
  • Recording fees
  • Notary fees
  • Prepaid interest, homeowners insurance premiums, mortgage insurance premiums and property taxes
  • Transfer taxes
• Real estate commissions
• Escrow payments
  • Homeowner’s insurance premiums
  • Mortgage insurance premiums
  • Property taxes

How much are escrow fees?

Typically, escrow fees cost 1%-2% of the home’s sale price. If you’re interested in buying a home that costs $450,000, for instance, the escrow fees may cost between $4,500-$9,000. Here’s an idea of how much you may pay in escrow fees based on price:

*These amounts are estimates for informational purposes only.

Note that some real estate attorneys charge a flat fee to finalize a real estate transaction. This is often less expensive than a percentage-based fee, but it’s still usually split between buyer and seller.

How are escrow fees determined?

Generally, escrow fees vary by the escrow company or real estate attorney, location and the home’s sale price.

• Home sale price: Escrow fees are often a percentage of the home’s sale price, so the higher the price, the higher the fee.
• Location: Sometimes, escrow fees are determined by the location in which the escrow process is handled, rather than the location of the home.
• Escrow company: Each escrow company or attorney sets their prices. They may choose to charge a percentage of the home’s sale price or a flat fee.

Final thoughts on escrow fees

Escrow fees cover the cost of setting up an escrow account, collecting and distributing funds and handling paperwork related to a real estate transaction. The fees typically cost 1%-2% of the home’s sales price, or sometimes a flat charge.  

Looking to sell, buy or finance a home? You can find qualified real estate agents on Zillow, and or find out what you can afford with a pre-approval from Zillow Home Loans.*

*Zillow Home Loans; an equal housing lender. NMLS #10287