A pertinent question when buying real estate is that of agent commissions. Who is responsible for paying real estate agent fees? The fine details of who pays the agent fees are murky but we will get to understand everything in this article.
If you are considering buying a home, you might have already started searching for a good real estate agent to help you through the process. The professional advice of a real estate broker is important for both buyers and sellers. However, the big question is who foots the bill for a realtor’s services.
A majority of buyers today will prefer to use a buying agent to find their dream home. The realtor will then set upon the task of finding a home that matches the specific requirements of their client. They will be pulling different home listings, driving to the identified homes, and performing home pricing analyses that come in handy when making strong offers.
After finding a suitable home for their client and the buyer’s offer is accepted and money is entered in escrow, the agent will set upon the second round of tasks. The agent will spend time coordinating home inspections and appraisals, negotiating repairs costs for the required repair works, handling all of the closing paperwork, and doing some light accounting work in light of the fact that the agent is responsible for maintaining the financial account used to pay inspectors and appraisers.
Both real estate buyers and sellers are responsible for handling the different fees. It is important to understand the typical best practices and responsibilities of different parties during a home sale.
The following are important tips to keep in mind about real estate agent commissions and what are your obligations in paying for the services.
Standard practice is that a seller will pay the real estate commissions for both the listing agent and the buyer’s agent. The seller will pay the realtor’s fee at the settlement table where the fee is subtracted from the total proceeds of the home sale. The amount will go to the listing agent who will in turn split the amount with the real estate agent who brought the buyer. In the normal scenario, the seller will include the realtor fees in the final price of the house which essentially means that the buyer ultimately pays all agent fees. All the seller does is subtract realtor commission from the proceeds of the sale without having to dig into his/her pockets for the amount.
Realtor fees are paid on a commission basis which is set at about 5 percent to 6 percent of the purchase price of the property put up for sale. The realtor fee is a percentage of the sale price of the listed home. For example, if the home sells for $800,000, the real estate agent commission will be $48,000 which represents 6% of the total amount. The total fee is usually paid at closing by the property seller or as per any other arrangement agreed upon by the parties involved.
The details of the realtor’s professional fee should be included in the agreement entered when you hired them. Ask questions where necessary to clear any doubts that may crop so that you are pretty sure about everything as the process moves ahead.
In unique scenarios, you may find a dual agency whereby the agent hired to represent the buyer also represents the seller of the house on sale. A dual agent will represent the interests of both the buyer and the seller. The law requires that dual agents disclose that they will represent both sides in the transaction.
For purposes of listing the property, seek to identify and know about all fees from the chosen listing agent. Cities have their advantages, inquire about the listing fee for the property, photography fees, cost of signs, cost of any printed material and of course the realtor’s fees. The costs for staging the home or undertaking any repair works will generally come from your pocket.
A realtor’s fee is non-negotiable but will be dependent on the unique factors surrounding your property. You are able to negotiate the terms of the listing agreement with the selected agent and that where you have the opportunity to bring down the overall closing costs. Your negotiating skills or those of your realtor will help bring down closing costs. Do not be duped into thinking that closing costs are non-negotiable.
Closing costs are all other miscellaneous fees that are paid at closing besides the real estate agent fees. They will include surveyor costs, attorney fees, loan processing, messenger fees, insurance, any taxes, title company fees, recording of the real estate deed, and homeowners’ association fees.
It is the responsibility of a real estate agent to provide a buyer’s sheet listing all closing costs. As a buyer, you are also entitled to a good-faith estimate of the closing costs from the lender used for the real estate purchase. The total amount of real estate closing costs for a home purchase will range from 2 percent to 7 percent of the purchase price of the home. On average, closing costs will be about 3.5 percent of the sale price of the home.
In a bidding war or tough seller’s market, the seller can offer to pay a percentage of all of the realtor’s fees to help them stand out from the competition. Generally, the buyer pays for most of the closing costs since they will be bundled together in the total cost of the home. It is the work of the realtor to get the best deal for their client.