In Tennessee, closing costs can catch both buyers and sellers off guard, particularly when considering the sum of money exchanged prior to the finalization of a deal. Understanding who pays what at closing can save you thousands and help you avoid some of the most common and surprising settlement day surprises, regardless of whether you are a first-time home buyer in Nashville, selling an inherited property in Memphis, or relocating from Knoxville. At BluDoor, we break down every closing cost you need to be aware of in this guide, from real estate commissions to transfer taxes, title insurance, and lender fees, including negotiable options to keep more money in your possession.
Tennessee Closing Costs: Complete Guide to Who Pays What in Real Estate Transactions
Closing costs are borne by both the buyer and the seller in Tennessee; however, the burden falls more heavily on the seller. The seller is generally burdened with 8% to 10% of the closing costs associated with the sale, while the buyer is charged 2% to 5% of the sale price. As an example, due to closing costs, selling a home with a sales price of $400,000 results in total costs of between $32,000 and $40,000. Conversely, the costs associated with buying the home would only be $8,000 to $20,000.
The biggest driver of this disparity is the real estate commissions. The seller, in essence, pays both the buyer’s and the seller’s real estate agents, which makes up the majority of the seller’s closing costs. Even though some settlements have disrupted this practice, the majority of real estate transactions in Tennessee have not yet adopted these changes, and continue to require the seller to cover both agents.
How Much Are Closing Costs in Tennessee: Average Fees and Expenses
Costs vary depending on whether you’re the buyer or seller. By March 2026, the average home price in the state of Tennessee was $392,100, with the home price varying considerably by region. In Nashville, the median home price was $470,000, while in Memphis, it was $185,000, and in Knoxville, it was $301,000.
Here is what closing costs actually look like across Tennessee price points:
| City | Home Price | Seller Costs | Buyer Costs |
|---|---|---|---|
| Memphis | $200,000 | $16,000 – $20,000 | $4,000 – $10,000 |
| Knoxville | $300,000 | $24,000 – $30,000 | $6,000 – $15,000 |
| Nashville | $400,000 | $32,000 – $40,000 | $8,000 – $20,000 |
In Tennessee, buyers can expect closing costs to fall in the range of 2%-5% of the purchase price, contingent on the specifics of the associated loan program and any negotiations with sellers.
Tennessee Real Estate Closing Costs Breakdown: Buyer vs Seller Obligations
What Sellers Pay
| Closing Cost | Rate / Fee | Example on $400,000 Home |
|---|---|---|
| Real Estate Commission | 6.05% total (2.95% listing agent + 3.10% buyer’s agent) | $24,200 |
| Transfer Tax | $0.37 per $100 of sale price | $1,480 |
| Title Insurance | ~0.53% of final sale price | $2,120 |
| Property Tax Prorations | 0.46% of assessed value (varies by county) | Varies |
What Buyers Pay
| Closing Cost | Rate / Fee | Example on $320,000 Mortgage |
|---|---|---|
| Loan Origination Fee | 0.5% to 1% of loan amount | $1,600 – $3,200 |
| Appraisal Fee | Flat fee | $300 – $500 |
| Title Services | Lender and owner’s title policy + title search | Varies |
| Prepaid Expenses | Property taxes and homeowners insurance premiums | Varies |
Due to real estate commissions, sellers in Tennessee bear a larger financial burden at closing. Conversely, buyers incur more fees related to loans and title services, which depend on their mortgage provider and lender.
Tennessee Mortgage Closing Costs: Lender Fees and Third-party Charges
Lenders charge various fees upon closing. Most buyers do not shop around sufficiently to limit these costs. Comparing lenders can save you a lot of money. Origination, underwriting, and processing fees vary greatly. Here is what to expect:
- Origination Fees: This is the cost for the lender to process the loan. Some lenders have a fixed fee, while others have a fee based on a percentage of your loan amount.
- Underwriting Fees: This is a fee charged by the lender to review and approve your loan application. This can be expected to be in the range of $300 to $800.
- Processing Fees: These are the administrative costs for handling your paperwork. This is usually between $200 and $500.
- Credit Report Fee: This is charged to each borrower and is generally in the range of $25 to $50.
- Flood Determination: This is a required check to see if your property is in a flood zone and is usually under $50.
Here is what most buyers never hear: many of these fees are negotiable. Some lenders will forgo specific fees to earn your business if you are a strong borrower. Do not hesitate to ask your lender directly.
Tennessee Title Insurance and Attorney Fees: Who Covers These Expenses
In Tennessee, unlike many other states, attorneys are not required during the closing process. This can also represent cost savings. However, there is an unavoidable cost for both buyers and lenders, being the charge for title insurance. In Tennessee, buyers pay for both the owner’s title insurance policy and the lender’s title insurance policy. The lender’s title policy secures the lender’s interest in the property, while the owner’s policy offers protection to the owner. The following are the expectations for this process:
- Title Search: Confirms the seller’s legal ownership and uncovers any liens or encumbrances. Costs $150-$500 depending on the search’s complexity.
- Lender’s Title Insurance Policy: Protects the financial interest the lender has in your property for the time of the loan. Nearly all lenders require this when providing a mortgage.
- Owner’s Title Insurance Policy: Protects the buyer from disputes regarding ownership as well as title defects post-closing. Not required but recommended.
- Title Insurance Premiums: Associated with the purchase price of the home. Typically, this is several hundred dollars to $1,000.
- Optional Attorney Fees: Not required anywhere in the state, but many buyers and sellers retain a real estate attorney for unique legal matters or contract review. This will add an additional up to $1,500 to your costs
Property Tax Prorations and Escrow Requirements in Tennessee Closings
Tennessee’s property taxes are low when compared with other states, but still require adequate handling at closing. Tennessee’s average property tax sits at 0.46%, but varies considerably by county. Shelby County holds the highest state property tax rate at 1.12% compared to Cumberland County’s low rate of 0.34%. Expect the following:
- Understanding Prorations: In Tennessee, homeowners only pay property taxes for the months they own a property. This prorated system allows the seller to only pay their ‘fair’ tax share based on the closing date. This means homeowners do not have to pay a full 12-month tax bill.
- Funded Escrow Accounts: Lenders require buyers to set up an escrow account if the buyer places a down payment of less than 20%. At the closing of the property, the buyer prepays several months of property taxes and the homeowners’ insurance, which the lender will pay for when they come due.
- Closing with Tax Certificates: Counties in Tennessee expect sellers to provide updated tax certificates to close a property. This proves that all taxes have been paid and are up to date. This fee is typically 100 dollars or less.
- Closing Date Matters: Prorations are based on the buyer’s closing date. For example, if the buyer closes on the 15th of July, then the seller is responsible for paying the taxes for the 1st of January to the 15th of July, and the buyer then is responsible for paying taxes for the 16th of July to the 31st of December.
Tennessee Home Inspection and Appraisal Costs: Buyer Responsibilities
Home inspections on their own can run between $325 and $425 in Tennessee and cover system components and structural components, including the roof, foundation, and HVAC. Given Tennessee’s generally mild weather, pest inspections, which check for termites and wood-destroying pests, can run $50 to $250, and in many counties, are strongly recommended as well.
Before your lender clears the loan, they will want to see that the home is worth what they will be lending you. Usually costing $500 to $1000, more complex and rural properties will cost even more. Inspections and appraisals are valuable collateral costs that ensure you don’t overpay for your home and that you don’t have to deal with large, concealed, costly problems that were left by the seller.
Recording Fees and Transfer Taxes in Tennessee Real Estate Transactions
In Tennessee, the cost of recording fees is about $600 to $700, and varies by county. This cost makes the transaction part of the official public record. A transfer tax of $0.37 per $100 of the full purchase price is required to be paid by the seller for the legal transfer of the property. The deed is prepared by the title company or attorney, at an additional cost of $100 to $300. Overall, these fees are on the lower end compared to what is charged by other states.
Tennessee Real Estate Commission Fees and How They Affect Closing Costs
The closing costs for sellers include real estate commissions that generally range from 5% to 6% of the home sale price. After the 2024 NAR settlement, sellers no longer have to offer Buyer’s Agent compensation on the MLS. However, many sellers still include this compensation to ensure a larger buyer pool. In the majority of Tennessee, including Rutherford County, offering compensation to Buyer’s Agents remains the industry standard.
It is important to know that commissions are negotiable; therefore, you should ask your realtor what services are covered at different commission levels. Sometimes, the realtor with the lowest commission is not offering the best value service, compared to a higher commission realtor, and may actually cost the sellers more in the end.
Homeowner’s Insurance and PMI Requirements for Tennessee Property Closings
Tennessee law requires new homeowners to have a home insurance policy active before closing. Premiums range from about $800 to $1,500, paid in full on the closing day. If your home is in a floodplain, a flood insurance policy is required along with the home insurance policy if the mortgage is federally backed.
While securing a mortgage, if your down payment is under 20%, expect to include the cost of Private Mortgage Insurance (PMI) as part of your closing costs. PMI may be 0.3% to 1.5% of your loan. On a $300,000 loan, PMI would cost between $900 to $4,500 per year. You can request PMI cancellation under two conditions: your loan amount drops to 80% of the home’s value, and the PMI is automatically canceled when the loan drops to 78% of the home’s value.
Tennessee Closing Cost Calculator: Estimating Your Total Settlement Expenses
Here’s a simple way to estimate your closing costs in Tennessee:
| Insurance Type | Cost | Key Details |
|---|---|---|
| Homeowner’s Insurance | $800 to $1,500 annually | First year prepaid at closing; varies by home value and location |
| Flood Insurance | Varies | Required for federally backed loans in designated flood zones |
| Private Mortgage Insurance (PMI) | Required when down payment is less than 20% | Required when down payment is less than 20% |
| PMI on $300,000 Loan | $900 to $4,500 per year | 0.3% to 1.5% of the loan amount annually |
| PMI Cancellation | N/A | Request at 80% loan to value ratio; automatically cancels at 78% |
Negotiating Closing Costs in Tennessee Real Estate Deals
Tennessee law provides flexibility for negotiating who pays each closing cost, as it does not specify the payer. In a buyer’s market, sellers can provide credits toward closing costs to attract buyers. Everything that affects closing costs, including commissions, loan fees, title insurance, appraisals, inspections, and any concessions, can be negotiated, with the exception of required and mandatory taxes, fees, and insurance. When selling a house with a lien in Tennessee, that same flexibility can work in your favor. Outstanding liens must be satisfied at or before closing, but sellers can negotiate how lien payoffs are structured within the transaction, often using proceeds from the sale to clear the debt and rolling any related costs into the overall closing settlement.
From a savings perspective, it is worth your while to ask sellers to cover fees with more specificity, negotiate commissions with your agent, and take the time to explore multiple lender fee options. Pay attention to the option to buy points to decrease your interest rate, and ask about lender credits in return for a higher interest rate. If you are working with cash home buyers in Tennessee or surrounding cities, many of these fees can be eliminated entirely, saving you thousands without the need for lengthy negotiations. You are going to save a lot of money with more effort in negotiating who pays closing costs, with little risk, as the worst any seller can do is say no.
Tennessee Cash Purchase vs Financed Purchase: Closing Cost Differences
At closing, cash buyers save about $3,000 to $12,000 because they do not pay lender closing costs. Cash purchases also close much faster, in 7 to 14 days, giving cash buyers leverage to negotiate on price. Financed purchases close in 30 to 45 days.
| Closing Cost | Cash Purchase | Financed Purchase |
|---|---|---|
| Title Insurance | $800 to $1,500 | $800 to $1,500 |
| Title Search | $150 to $500 | $150 to $500 |
| Recording Fees | $200 to $400 | $200 to $400 |
| Inspection | $400 to $600 (optional) | $400 to $600 (optional) |
| Loan Origination Fee | Not applicable | $1,500 to $4,000 |
| Appraisal | Not applicable | $500 to $1,000 |
| Credit Report | Not applicable | $25 to $50 |
| Underwriting Fee | Not applicable | $300 to $800 |
| Prepaids | Not applicable | $2,000 to $5,000 |
| Estimated Total | $1,500 to $3,000 | $5,000 to $15,000 |
Common Tennessee Closing Cost Mistakes That Increase Your Final Bill
Buyers and sellers in Tennessee make costly mistakes when closing that stem primarily from not doing due diligence. The first mistake buyers make involves choosing a lender or title company without first looking at others, costing them thousands. Some buyers don’t take the time to review their Loan Estimate and miss assistance programs. They also overpay for inspections, because they don’t get varied quotes, and don’t plan for prepaids that need to be paid at closing (property taxes and insurance) for two to six months.
Many sellers, on the other hand, think real estate commission is an unchangeable cost, when in fact, it is entirely negotiable. Procrastinating on the closing details leads to rush fees that add up quickly. Selecting an inferior loan is also costly because there are fixed costs for mortgage loans through the FHA, VA, conventional options, or USDA programs. If you are looking for a company that buys homes in Memphis or nearby cities, working with a direct cash buyer eliminates commission costs, lender fees, and loan-related expenses entirely. Comparing mortgage lenders, insurance, and available programs can be time-consuming, but it will pay off in the end and save you a lot of money before the closing.
FAQs
Does the Buyer or Seller Pay Closing Costs in Tennessee?
In Tennessee, both parties contribute to the closing costs, although the sellers usually bear the greater portion. While buyers typically face a closing cost range of 2% to 5%, sellers can expect to pay from 8% to 10% of the sale price. The greater closing costs on the seller’s side are attributed to the seller paying the commissions for both parties’ agents, which typically range from 5% to 6% of the sale price.
How Much Are Closing Costs on a $300,000 House?
For a $300,000 residence in Tennessee, buyers incur closing costs between $6,000 and $15,000 (which is 2-5% of the purchase price). Sellers incur substantially more costs, typically ranging from $21,000 to $30,000 (which is 7-10% of the sale price). Most of these costs are incurred due to real estate commissions. The closing costs vary primarily based on the type of loan, negotiations, and local fees.
Does the Seller Usually Pay Closing Fees?
In Tennessee, sellers bear closing costs more than buyers. Sellers handle transfer fees, agent commissions, prorated property taxes, and attorney fees, if applicable. Various fees, however, are open to negotiation on a case-by-case basis.
What Are the Average Closing Costs on a $400,000 Home?
For homes in Tennessee, buyers spend about $8,000 to $20,000 in closing costs, and sellers cover about $28,000 to $40,000 in closing costs. Sellers cover about $24,000 in real estate commissions, which is 6% of the sale price, along with transfer taxes, title insurance, and other fees. Selling buyers cover loan origination fees, appraisal and inspection fees, title services, and other prepaid expenses, such as property taxes and insurance.
At BluDoor, we make the process simple by covering all closing costs so you walk away with more money in your pocket. No hidden fees, no surprise expenses, no out-of-pocket costs on closing day. Whether you are facing foreclosure, dealing with an inherited property, or simply ready to move on, our team is here to guide you every step of the way. Contact us today
Helpful Tennessee Blogs
- Who Pays Closing Costs When Selling A House In Tennessee
- How To Sell A Probate House In Tennessee
- How to Sell Your House by Owner in Tennessee
- How To Sell Your House With A Lien In Tennessee
- Taxes When Selling a Home in Tennessee
- Sell a Tenant-Occupied Home in Tennessee
- Sell a Hoarder House in Tennessee Fast
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