Most homebuyers and sellers don’t know what the average real estate agent commission is in their area. This doesn’t come as a surprise as real estate commission rates can vary widely, even in the same city. But while commissions are negotiable, they often range from 3% to 6% of the home’s selling price. The details on these fees should be laid out in the agreement you signed when you hired your agent.
Standard practice is that the seller will pay the commission. The total fees are paid at the closing and are subtracted from the sale proceeds. To cover the loss, sellers will often build these costs into the listing price so the buyer ultimately pays for the service, albeit in an indirect manner.
Once the commission is disbursed, the listing agent will split the amount with the buyer’s agent, usually 50/50. For example, if a home sells for $400,000 and assuming the real estate commission is 5%, the fee would amount to $20,000. The agents might then split that amount, with each receiving $10,000.
While buyers are never on the hook for Realtor fees, it is important for them to understand this fee structure. Some buyers who choose not to work with a real estate agent may use this information to try to bargain with sellers for a lower price on the grounds that the commission can be cut in half. And in highly competitive housing markets, buyers working with Realtors may offer to cover the fees to sweeten the deal.
Closing costs are various fees separate from the real estate agent fees that are due at the settlement table. These expenses may include loan origination fees, title searches, insurance, surveys, deed recording fee, property taxes, and credit report charges. By law, the lender must disclose these costs in a loan estimate form within three days of a home loan application.
Like real estate fees, closing costs are negotiable. But there’s no cut-and-dried rule about who is responsible for the closing costs. Typically, the buyer will cover most of the costs while the seller may chip in up to a certain amount, depending on what has been agreed. Buyers also have the ability to roll the closing costs into the loan principal so they don’t have to pay them up front.
When you are ready to purchase a home, don’t go it alone. Numerous advantages come from working with professionals. Real estate agents and your mortgage team should work closely together to eliminate your stress and support you along the way. I would love to help you decide which loan program is right for you. If you need a Realtor, I can refer you to one of my trusted partners in the industry. Call me today to set up an appointment!
