When purchasing real estate, you will go through an escrow or closing after the contract is written. Both buyer and seller have closing cost associated with the purchase. Some of those cost are proration of taxes, attorney fees, transfer stamps, recording fees, and other fees associated with moving the property ownership from one entity to another. If financing is being used, those fees typically go up significantly. Lenders, as a rule, charge an origination fee to do the loan, almost always require the buyer to purchase an appraisal, can require a survey in certain instances, and other fees that are not always applicable in a cash transaction. Prepaid items, many times, get lumped in with closing cost because of where they appear on a closing statement. They are not what we define as closing cost in the truest form, but you have to pay some of these as part of the closing for things such as setting up an escrow account for paying taxes and insurance at the end of the year and paying the appraisal fee on the property.