Compare Listings

Who Really Shoulders the Realtor and Closing Costs?

Who Really Shoulders the Realtor and Closing Costs?

Real estate agents are helpful in providing information to the parties involved in a sale in real estate. We have the knowledge on prices and trends in the housing market, as well as important selling points when selling a home. 

Real estate agents make a living by receiving commissions, also known as realtor fees, when they close a sale on a houses. These commissions depend on the location of the sale, the type of house sold, the brokerage contract, and other factors as well.

Realtor Fees, Defined

What is a realtor fee? It is a certain percentage of the sale price, which is usually pegged at 6%. The fee is actually written into the contract and is separate from the sales contract between the seller and the buyer.

Payor of Realtor Fees

So at the end of the day, who pays the realtor fee? If you are the buyer in the transaction, then you are in luck. It is the seller who actually pays the fee to the real estate agent. You may want to take this into consideration when you decide to sell your home.

The realtor fee is usually paid at closing. The listing price offered by the seller usually takes into consideration the realtor fee. The fee is subtracted from the profits of the sale.

After the close of a successful sale, the realtor fee is divided between the buyer’s agent and the seller’s agent. The seller will pay the realtor fee to the listing broker, who then pays a percentage of it to the real estate agent who produced the buyer.

Closing Costs, Defined

If you go through real estate contracts, you might notice a monetary amount under the title “closing costs”. These are all the miscellaneous fees different from the realtor fee discussed above. As its name suggests, the closing costs must be paid at closing. These miscellaneous fees are the following:

  • title company fees
  • recording of the deed
  • loan processing
  • insurance
  • surveyor costs or any inspection costs
  • any other taxes or fees that needs to be paid for a complete transfer of the property’s name to yours​
  • homeowner or association fees.

Closing costs are different across the country due to reasons such as the type of home, the purchase price, the usual rate in your locality, or even the brokerage firm’s own rate. It can range from as low as 2% and as high as 7% of the house’s purchase price. The average closing costs is around 3.5% of the sale price of a home.

You will know the breakdown of the closing costs since your agent will provide the details and go over all of them for you.

For due diligence, you will want to go over it and ask as many questions as you can to fully understand the details. Note that under the federal law, you are obliged to receive a “good faith” estimate of your closing costs from any financial institution or lender you use.

Try To Negotiate Closing Costs With Seller

If the seller pays the realtor fees, then who pays the closing costs? For these fees, it can be quite tricky since there is no hard and fast rule regarding the payor for closing costs.

A little negotiating skills will not hurt in order to ensure that the other person ends up paying the closing costs. In reality, the usual situation is the buyer covers the burden of the closing costs, around 3% to 4% of the purchase price, as compared to the seller who usually bears only 1% to 3%.

If you are the buyer in the transaction, then you may want to negotiate thoroughly before closing the deal. To be sure that there will not be disputes regarding the payment of the closing costs, some buyers have written into the contract the percentage share of the buyer and the seller.

In cases when the closing costs are too high for the buyer and the seller does not want to share the burden, then you may have the option to request the closing costs to be included in the mortgage. This of course will depend on the lender.

What if There is Dual Agency?

Dual agency is the situation wherein the agent representing the buyer to the transaction happens to be the person who also represents the seller. This situation is particularly tricky since an agent has to be working for the best interest of the principal, i.e. either the buyer or the seller. And being an agent for both sides can lead to a conflict of interest since the seller wants to get a higher price from the sale while the buyer wants to lower it as much as possible.

It is not surprising that there are certain states, such as Florida, Kansas, and Colorado, which made dual agency unlawful. For those states that allow dual agency, the real estate agents are required to disclose to all parties that they will be both representing the buyer and the seller.

Dual agency is particularly enticing to real estate agents because they get a bigger commission since they do more work.

In conclusion, aside from the listing or purchase price, there are other fees that you have to take into consideration when buying a house. Factor in the fees mentioned above when shopping around for a mortgage because these costs, which can be small if considered separately, can be a sizable amount when they all add up. 


Alfonso Rodriguez

Related posts

Nueces Floor Plan by William Lyon @ Carmel in Pflugerville TX

My Take Of The Carmel CommunityFor starters, the subdivision is far east Pflugerville so travel...

Continue reading
by Alfonso Rodriguez

Bought A Home in 2019? File Your Texas Homestead Tax Exception!

Congrats on buying a home in 2019! Now you need to file your Texas Homestead property tax...

Continue reading
by Alfonso Rodriguez

Pulte Homes At Parmer Crossing In North Austin

Fox Hollow Floor Plan By Pulte Homes At Parmer CrossingThe gourmet kitchen on the Fox Hollow floor...

Continue reading
by Alfonso Rodriguez