Define the term "closing costs" in a real estate transaction.

The term "closing costs" refers specifically to the fees and expenses that are incurred during the final stage of a real estate transaction, which occurs at the closing or settlement when ownership of the property is transferred from the seller to the buyer. These costs are in addition to the actual purchase price of the property and typically include a variety of items such as title insurance, appraisal fees, inspection fees, origination fees for loans, and various taxes and recording fees.

Understanding closing costs is important for both buyers and sellers, as they can significantly affect the overall financial obligations involved in a real estate transaction. Both parties need to be aware of these costs in order to budget effectively and understand the total amount of money that will change hands at closing.

Other options provided do not accurately capture the definition of closing costs. For example, tax implications pertain to the financial impact of property ownership on taxes, home improvement projects involve expenses related to renovating or upgrading a property, and insurance premiums specifically refer to the regular payments made for coverage on a property rather than costs incurred directly in the transaction process.