Updated April 2026

Illinois Real Estate Exam Guide: Closing Costs Breakdown

Last updated: April 2026

Navigating the complexities of a real estate transaction requires a deep understanding of who pays for what at the closing table. For aspiring brokers taking the Illinois real estate licensing exam, mastering the closing costs breakdown is non-negotiable. The Illinois Department of Financial and Professional Regulation (IDFPR) expects licensees to accurately explain settlement charges, prorations, and transfer taxes to their clients.

Whether you are tackling the national portion's questions on the TILA-RESPA Integrated Disclosure (TRID) rule or the state-specific math questions regarding transfer taxes, this guide will serve as your roadmap. For a holistic view of the licensing process, be sure to bookmark our Complete Illinois Exam Guide.

The Anatomy of Illinois Closing Costs

Closing costs typically range from 2% to 5% of the property's purchase price for buyers, and 6% to 10% for sellers (largely due to broker commissions). These costs are distributed across various third-party services, government taxes, and lender fees.

Below is a visual representation of how typical non-commission closing costs are distributed in an average Illinois transaction:

Typical Non-Commission Illinois Closing Cost Distribution ($)

Buyer vs. Seller Responsibilities in Illinois

While everything in real estate is technically negotiable, Illinois has strong local customs dictating who pays specific closing costs. The exam will test your knowledge of these customary practices.

Customary Seller Costs

  • Brokerage Commission: Typically the largest seller expense, negotiated at the time of the listing agreement.
  • Owner's Title Insurance Policy: By custom in Illinois, the seller purchases the owner's title policy to prove to the buyer that they are conveying clear and marketable title.
  • State and County Transfer Taxes: The seller is customarily responsible for paying the state and county real estate transfer taxes (more on this below).
  • Deed Preparation: The seller pays their attorney to draft the deed conveying the property.
  • Property Tax Prorations: Because Illinois pays property taxes in arrears, the seller must give the buyer a closing credit for the time the seller owned the home during the current, unbilled tax year.

Customary Buyer Costs

  • Lender's Title Insurance Policy: If the buyer is financing the purchase, they must pay for a title policy protecting the lender's interest.
  • Loan Origination and Discount Points: Fees charged by the lender to process the mortgage.
  • Appraisal and Inspection Fees: Paid by the buyer to assess the property's value and physical condition.
  • Recording Fees: The buyer pays the county recorder of deeds to publicly record the new deed and mortgage.
  • Municipal Transfer Taxes: While state and county transfer taxes are paid by the seller, many local municipalities (like Chicago) levy an additional transfer tax that is customarily paid by the buyer.

Understanding the timing of when these funds are deposited and dispersed is crucial. You can learn more about this sequence in our Illinois escrow process timeline guide.

Mastering Illinois Transfer Taxes (Exam Essential)

You will almost certainly encounter a math question regarding the Illinois Real Estate Transfer Tax Law (35 ILCS 200). You must memorize the specific state and county rates.

The transfer tax is calculated based on the property's sale price, usually per $500 of value (or fraction thereof).

  • State Transfer Tax Rate: $0.50 per $500 of value.
  • County Transfer Tax Rate: $0.25 per $500 of value.
  • Total Customary Seller Tax: $0.75 per $500 of value.

Transfer Tax Calculation Scenario

Scenario: A home in DuPage County, Illinois, sells for $345,000. How much will the seller pay in state and county transfer taxes?

  1. Divide the purchase price by $500:
    $345,000 ÷ 500 = 690 taxable units
  2. Calculate the State Tax:
    690 × $0.50 = $345.00
  3. Calculate the County Tax:
    690 × $0.25 = $172.50
  4. Total Transfer Tax:
    $345.00 + $172.50 = $517.50

Note: If the purchase price divided by 500 results in a fraction (e.g., 690.5), you must round UP to the next whole number (691) before multiplying by the tax rate.

Prorations: The "In Arrears" Rule

Prorations ensure that expenses like property taxes, HOA dues, and water bills are fairly divided between the buyer and seller based on their exact days of ownership. In Illinois, property taxes are billed in arrears. This means the tax bill received in 2026 actually covers the 2025 tax year.

Because the buyer will eventually receive a tax bill that includes the time the seller lived in the home, the seller must provide a credit to the buyer at closing. On the exam, you may be asked to calculate this using either a statutory year (360 days / 30 days per month) or a calendar year (365 days). Always read the question carefully to see which method is requested.

Regulatory Framework: TRID and RESPA

The Real Estate Settlement Procedures Act (RESPA), implemented via the TRID rule (TILA-RESPA Integrated Disclosure), governs how closing costs are disclosed to consumers. For the exam, you must know the two critical TRID documents:

  • The Loan Estimate (LE): Must be provided to the buyer within three business days of their loan application. It provides an itemized estimate of closing costs.
  • The Closing Disclosure (CD): Must be provided to the buyer at least three business days before consummation (closing). This document finalizes the exact closing costs.

If there is a significant change to the loan—such as an APR increase of more than 0.125%, a change in the loan product, or the addition of a prepayment penalty—the three-day CD review period resets. For a deeper dive into reading these forms, check out our settlement statement walkthrough.

Preparation is Key

Closing costs and settlement statements synthesize real estate math, state law, and federal regulations. Practicing these calculations until they become second nature is the best way to secure a passing score. To find the top-rated prep tools and practice exams to help you drill these concepts, explore our recommendations for the best Illinois study materials.

Frequently Asked Questions (FAQs)

Who customarily pays for title insurance in Illinois?

In Illinois, the seller customarily pays for the Owner's Title Insurance Policy to assure the buyer that the title is clear. The buyer pays for the Lender's Title Insurance Policy if they are financing the purchase with a mortgage.

How do I handle fractions when calculating Illinois transfer taxes?

Illinois law dictates that transfer taxes are charged per $500 of value or fraction thereof. If you divide the purchase price by $500 and get a decimal (e.g., 450.2), you must round up to the next whole number (451) before multiplying by the $0.75 combined state and county rate.

What does it mean that Illinois property taxes are paid "in arrears"?

Paid in arrears means that property owners pay taxes for the previous year. For example, a tax bill issued in 2026 pays for the property taxes accrued in 2025. Therefore, at closing, the seller must credit the buyer for the portion of the current year they owned the home, since the buyer will get the bill for it next year.

What triggers a new 3-day waiting period for the Closing Disclosure (CD)?

Under TRID rules, three specific changes will trigger a new 3-day waiting period: 1) The Annual Percentage Rate (APR) increases by more than 0.125% for a fixed-rate loan or 0.25% for an adjustable-rate loan, 2) The loan product changes (e.g., switching from an FHA to a Conventional loan), or 3) A prepayment penalty is added.

Does the buyer or seller pay the municipal transfer tax?

Unlike state and county transfer taxes which are customarily paid by the seller, municipal (city) transfer taxes vary by local ordinance. In many major municipalities, such as Chicago, the primary burden of the municipal transfer tax falls on the buyer, though some cities split it or assign it to the seller.

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