Oregon 30-Hour Real Estate Law Practice Test

What is typically included in the closing costs of a real estate transaction?

1. Life insurance and homeowner's insurance

2. Only the real estate agent's commission

3. Fees for inspections, appraisals, and loan origination

4. Costs solely related to the seller's legal fees

The correct answer is: Fees for inspections, appraisals, and loan origination

Closing costs in a real estate transaction encompass a variety of fees that are necessary to finalize the sale. This typically includes charges for inspections to assess the condition of the property, appraisals to determine its market value for financing purposes, and loan origination fees charged by lenders for processing the loan application. These various costs contribute to the total amount necessary to complete the transaction and transfer ownership. In contrast, the other options reflect a more limited scope of what closing costs entail. Life insurance and homeowner's insurance, while important, do not fall under closing costs but rather are separate insurance products necessary for the protection of the buyer and the property. The real estate agent's commission, though a significant part of the transaction, is just one of many costs and cannot solely account for closing costs. Lastly, closing costs do not consist solely of the seller's legal fees, as these are just one aspect of the overall expenses incurred during the closing process, which involves both the buyer's and seller's obligations.