Closing on your first home is a very exciting albeit confusing process. There are various documents involved in the closing as well as various associated fees. Understanding real estate fees and the details involved is an integral part of understanding the closing process and preparing for a smooth transaction. Before going to closing both the buyer and the seller should be aware of who is responsible for which payments to avoid any confusion.
The real estate agent’s fees are one of the costs associated with buying a home. The fees are usually a percentage of the sale price of the home and usually range from five to six percent. Any fees charged by the agent must be arranged before the closing of the home and the final fees usually aren’t known until a sale price has been agreed upon between the buyer and the seller. The specifics of who pays the real estate agent’s fees are dependent on different factors. The fee comes from the actual cost of the home and is not added on to the sales price itself. Therefore if the seller owns the house outright, the fee is coming from the equity in the home, however if there is not enough equity to cover the fee, it is being taken from the cost of the home on the buyer’s end. Often times, both the buyer and the seller will split payment evenly between them.
If there are two real estate agents involved in the closing, the fee will usually be divided between them although it is possible for either the buyer or the seller’s agent to receive more than the other. The lawyers overseeing the closing are usually responsible for distributing the commission appropriately between the real estate agents. The fee is paid directly to the brokers and then the brokers take a percentage and distribute the remainder to the real estate agents.
Some agents do not charge a percentage of the sales price of the home but instead work for a flat fee. These are usually listing agents who will advertise the property through their own listings. A listing agent usually does much less than a commissioned agent would to assist with the selling of the home. A commissioned agent not only lists the house but also aids in holding open houses as well as paying advertising costs for the selling of the home. In addition a real estate agent working on commission has more of a vested interest in the sale of the home as they are paid after the closing has been completed.
Understanding the basics of real estate agent’s fees can help both the buyer and the seller have clarity and understanding throughout the closing process. It is important to read the fine print carefully to fully understand just how much the real estate agent’s fees will be before agreeing to hire them. Although some contend that a real estate agent’s fees are unwarranted compared to the labor involved, the fee comes from the cost of the home instead of out of pocket and this can make the expense much more bearable. In the end, it is worthwhile to have the services of a professional to assist with one of the biggest purchases a potential homeowner may ever make.
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