Your Guide to Realtor Fees and Closing Costs

How Realtor Fees and Closing Costs Work for Buyers and Sellers

 

After purchasing or selling a home, you’ll have to pay realtor fees and closing costs. These costs are how real estate agents make money and how certain parts of the home buying process, like insurance and loan processing, get covered.

 

Realtor Fees

The realtor fee is the percentage of the sale price of a house that the realtor takes home. The seller, not the buyer, is the one who pays the realtor fee. Typically, the realtor fee is 6% of the sale price, although it does vary. The profit from this fee is split between the seller’s realtor and the buyer’s realtor. Unlike closing costs, realtor fees are usually not up for negotiation, because they are set as part of the deal. However, before signing a contract with an agent, the seller could agree that both the buyer and seller pay half of the realtor fee.

 

Closing Costs

Closing costs are completely separate from the realtor fee. Closing costs usually cover the costs of loan processing, surveying, title company fees, insurance, recording of the deed, homeowners’ association fees, taxes and more. While closing costs usually range from 2% to 7% of the home’s price, they vary widely because they can be negotiated. Usually homeowners pay between 3% and 4% of closing costs, whereas sellers usually pay between 1% and 3%. Additionally, realtors are required to provide a “good-faith” estimate of the closing costs before the deal is completed, so make sure you receive this estimate so you can negotiate with precise numbers.

How to Lower Your Closing Costs

Shop Around for Home and Title Insurance: Home and title insurance protect the homeowner, so you don’t want to scrimp too much on these costs. However, you can shop around to make sure you’re getting a good deal.

Negotiate With the Seller: Sellers are allowed to pay up to 6% of closing costs on an FHA loan, 4% on a VA loan and 3% to 6% on a conventional loan. Negotiating these costs with the seller can save you a significant amount of money.

Close at the End of the Month: Because closing costs include interest that accumulates during the month, closing at the end of the month rather than the beginning allows you to save more money.

 

Being prepared to pay realtor fees and closing costs is important. Although there are ways to lower these costs, they are still likely to be pricey. Make sure realtor fees and closing costs are included in your budget when you decide to buy or sell a home. Understanding these costs and how they’re divided among buyers, sellers and agents will ensure your money is budgeted well and that you are prepared to pay these fees.