What are closing costs in real estate transactions?

Closing costs refer specifically to the various fees and expenses that are incurred during the finalization of a real estate transaction, typically payable at the closing meeting when ownership of the property is officially transferred. These costs can include a variety of charges such as title insurance, appraisal fees, loan origination fees, recording fees, and prepaid taxes. They are essential because they represent the final expenses that buyers and sellers must account for to complete the sale, making option B the most accurate description of what closing costs are.

In contrast, the other choices describe scenarios that do not pertain to the finalization of a real estate sale. Fees associated with the cancellation of contracts do not represent the costs involved in closing a transaction. Costs incurred for renting a property focus on leasing, not on the closing of a sale. Expenditures for property auctions refer to costs related to bidding on properties rather than the expenses tied to completing a real estate transaction. Thus, option B clearly defines closing costs in the context of real estate.