Which item is typically included in closing costs (uses) for a real estate acquisition?

• A. Ongoing property management fees.
• B. Legal fees, due diligence, title, consultant fees, financing costs, transfer taxes, closing attorney fees.
• C. Leasing commissions after closing.
• D. Capital expenditures for property improvements.

Answer: (B)

Closing costs are the fees paid to complete the purchase, not ongoing costs of owning or operating the property. They capture the transactional expenses incurred at the time of acquisition. Legal fees, due diligence, title work or title insurance, consultant fees, financing costs (such as loan origination fees and points), transfer taxes, and closing attorney fees all fall into this category because they are directly tied to closing the deal and obtaining the financing, if any.

Ongoing property management fees are operating expenses incurred after closing to run the property. Leasing commissions after closing happen when new leases are negotiated and signed, not as part of the purchase closing. Capital expenditures for property improvements are investments in the asset itself and are capitalized separately from the closing costs. In short, the items listed under closing costs are the transactional fees associated with finalizing the acquisition.