Placepoint

Closing costs

Closing costs (omkostninger) are the buyer's additional costs in a home purchase, that is, everything you have to pay on top of the purchase price itself to have the property transferred to you. For an ordinary freehold home, closing costs are typically 2.8 to 3.0% of the purchase price. It is the second largest single cost in most home purchases after the purchase price itself, and it is the item that often surprises first-time buyers.

For freehold ownership (property with legal title in Grunnboken), closing costs consist of three main items. Document duty is the largest: 2.5% of the purchase price. The duty follows from dokumentavgiftsloven (the Document Duty Act), while the rate itself is set by the Storting in the annual duty resolution. The duty is administered by Skatteetaten, the Norwegian tax authority. The duty falls due on registration of the deed that transfers legal title to real property. The registration fee is a fixed amount per document registered in Grunnboken, with rates from Kartverket (check the current rates directly with Kartverket, as the rates are adjusted annually). You typically pay one fee for the deed and one for the mortgage deed (one, if the purchase is financed with a home loan). The mortgage deed fee is separate from document duty and falls due only for the mortgage deed, not for the transfer itself.

In addition come certificate costs and smaller items: certificate of encumbrances, the fee for a Grunnboken extract, any insurance premium for buyer's home purchase insurance, and a small administration cost from the broker. These typically add up to 5,000 to 12,000 kroner. Document duty alone makes up by far the largest part of the closing costs.

For a housing co-operative (borettslag), the calculation is entirely different. The share owner does not buy real property, but a share in a co-operative under borettslagslova (the Housing Co-operatives Act). The transaction is registered in Borettsregisteret and does not trigger document duty. Closing costs are therefore far lower, typically 6,000 to 12,000 kroner in total: the fee for the share transfer in Borettsregisteret, any business manager fee and certain administration costs. On the other hand, shared debt is included in the total price. For a share-based flat (aksjeleilighet), the same reduced closing costs apply as for a housing co-operative.

For commercial property, closing costs are usually the buyer's responsibility and include document duty, registration fees, legal advice, due diligence and the broker. In a share purchase of a company that owns the property (a common structure to avoid document duty on the transfer of legal title), the document duty falls away, but the buyer takes on the historical tax position, contingent liabilities and a lower book value as a "tax discount" to the seller.

A distinction is drawn between closing costs and fees at settlement: the pro contra apportionment of shared costs, municipal charges, electricity and ground rent. These are not closing costs in the strict sense, but a settlement calculation between seller and buyer on the handover date. The broker calculates and settles this automatically in the pro contra settlement.

For realistic budgeting, you should always look at the total price: purchase price + closing costs + any share of shared debt. That is the real amount you have to handle on the handover date, not the "asking price" that appears in the advertisement.

Closing costs must be covered by equity or a home loan on the handover date, and banks usually accept that they are included in the loan within the maximum loan-to-value ratio. Eiendomsmeglerloven § 6-7 (the Estate Agency Act) requires the total price including closing costs to be stated clearly in the written information document the buyer is to receive before an agreement is entered into, so that the buyer cannot be misled about the real cost. If you, as a consumer, face unexpected additional items beyond what was stated in the sales prospectus, this may be grounds for a complaint to Reklamasjonsnemnda for Eiendomsmeglingstjenester, the complaints board for estate agency services.

From Placepoint's glossary: Omkostninger

More information: Skatteetaten: Dokumentavgift, Kartverket: Gebyr for tinglysing, Lovdata: Dokumentavgiftsloven

English: Closing costs (stamp duty plus registration fees).

Common questions we come across

How much are the closing costs when buying a home?

For freehold ownership, closing costs are typically 2.8 to 3.0% of the purchase price, dominated by document duty at 2.5%. For a housing co-operative, closing costs are far lower, typically 6,000 to 12,000 kroner in total, because no document duty falls due.

Why are closing costs lower for a housing co-operative?

A share owner in a housing co-operative buys a share in a co-operative, not real property. The transfer therefore does not trigger document duty. In return, a share of the shared debt comes with the purchase and forms part of the total price.

Who pays the closing costs?

The closing costs are paid by the buyer. They come in addition to the purchase price and must be available on the handover date. Many banks offer financing of closing costs together with the home loan itself.

What is the difference between closing costs and the pro contra settlement?

Closing costs are public duties and fees that fall due on the transfer. The pro contra settlement is a calculation between seller and buyer for the proportionate apportionment of shared costs, municipal charges and electricity around the handover date.

Are closing costs tax deductible?

When you buy a primary residence, closing costs cannot be deducted from tax. When you buy commercial property or a rental property, the closing costs are capitalised as part of the cost price and depreciated together with the property under the rules of the Tax Act.